2025 Global Automotive Outlook: Credit Ratings Likely Stable Despite Unpredictability on Several Fronts

In aggregate, we deem the credit outlook for the Automotive sector in 2025 to be Stable as most original equipment manufacturers (OEMs) have been able to build headroom into their ratings. However, we expect business to remain challenging regarding the industry's (near-term) transition to EVs, with the potential imposition of tariffs across key regional markets, representing additional uncertainty.

Key Highlights
-- The credit rating outlook for the sector is generally stable, although unfavourable geographic exposure could affect certain OEMs.
-- Automotive conditions in the key United States market appear modestly favourable in aggregate, although potential tariffs will add uncertainty.
-- Industry conditions in Europe are under pressure from geopolitical uncertainty, high pricing, and affordability concerns. The transition to Electronic Vehicles (EVs) will remain challenging in 2025.
--China will Likely undergo moderate growth, although legacy OEMs are increasingly out of the market.
--Global EV Sales will meaningfully increase, significantly reflecting strong growth in China.

According to Robert Streda, Senior Vice President, European Corporate Ratings, "The financial profiles of most automotive OEMs that we rate are quite resilient to any softening in earnings possibly occurring in 2025, thereby reaffirming our Stable credit outlook for the sector. Despite this, we note that certain OEMs with high exposures to China and Europe could generate markedly weaker earnings/cash flow compared with that of recent years, which, amid ongoing high investments and product development costs associated with the progressive electrification of the industry, could result in negative credit rating implications for these companies."