Global credit ratings firm Moody’s has been forced to bring down its outlook for the global auto industry from stable to negative because of slowing down of demand for cars and trucks in some of the crucial markets of the world.
Moody’s said in a research note published on Monday that auto sale for the current year are set to be dampened because of global slowdown of economic growth, a better than expected end to 2018 and a number of political issues that can turn out to be serious problems in this year.
The rating firm brought down by more than half, its earlier projection for the sale of light vehicles throughout the world for 2019. Bringing down the forecast, the ratings agency said that the slowdown in the sale of light vehicles that was noticed in the latter part of 2018 would not be completely recovered throughout 2019.
There would be an expected growth of about 0.5 per cent in the global sale of the auto industry according to Moody’s for this year. Its earlier projection was pegged at 1.2 per cent “which had assumed a stronger finish in 2018”, the firm said. A growth rate of 0.8 per cent has been forecast by it for 2020.
Moody’s predicted that in the first half of 2019, there would potentially be a continued drop in the demand and consequent sale for auto and the demand would pick up some of the lost ground in the last two quarters of the current year. The rating firm is also predicting a slowdown in the global economic growth and predicted that there would be stronger growth in some of the developing markets such as China for auto.
Moody’s also predicted that there would be a drop of almost 3 per cent in sale of auto in the United States in 2019 and a growth drop of 0.6 per cent in the year after. According to the firm, this would be because of the waning of a financing environment which was the driver of auto sales for so long.
The firm however also cited the potential imposition of import tariffs on auto and auto parts and steel by the Trump administration in the US as well as a wayward Brexit deal to be among the factors for the slowdown in auto sale in the US.
The prospect of a decline in sale for the auto industry could not have come at a worse time for those auto companies that are pushing hard and investing large amounts in their shift to new transportation tech, such as investment in the development of self-driving cars, connected cars, and some advanced safety features in cars.
There is also pressure of auto companies because of ever stricter pollution and emission norms which are forcing them to make investments in hybrid and electric vehicles, and in other greener options for passengers and freight.
(Adapted from CNBC.com)