2023 Global Automotive Outlook: Market Headwinds Likely to Soften Industry Earnings from Current Solid Levels
In aggregate, we deem the credit outlook for the Automotive sector in 2023 to be neutral, on balance. While volumes are projected to rise in line with the moderation of the global semiconductor shortage, this is expected to be more than offset by softer pricing and product mix, with costs and investment requirements remaining sizable. As such, profitability across the sector in 2023 is likely to weaken year over year, albeit remaining at sound levels. Moreover, we project the decline in earnings will only have a modest impact on the credit profiles of most automotive original equipment manufacturers given their strong liquidity positions and conservative financial policies. Accordingly, the ratings of Automotive issuers that currently carry a Positive trend could still be subject to a possible upgrade given the deemed resiliency of the specific issuer's financial profile. Similarly, we anticipate negative rating actions to be largely confined to specific credit events and/or meaningful underperformance of a given issuer.
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