The global auto industry landscape to potentially improve in 2022, according to Fitch Ratings.
FREMONT, CA: Fitch Ratings estimated that with supply challenges gradually easing and demand recovering, the global auto industry landscape could improve in 2022. Due to the trajectory of the pandemic, supply chains remain vulnerable to potential event risk. However, semiconductor availability should modestly increase on a sequential basis through 2022. While the sector outlook is neutral, the expected ratings in Fitch's portfolio will generally remain the same.
Most North American auto-related issues will continue to concentrate on increasing earnings and cash flow while also maintaining strong liquidity. Some issuers could also decide to reduce debt while a portion of FCF may be allocated to the shareholder returns, and M&A. Credit profiles for European auto manufacturers are projected to remain steady as leverage remains low, and liquidity stays strong, partially offsetting pressure on underlying profitability owing to product mix normalization. The leverage of APAC’s automakers is expected to improve slightly.
Global sales are expected to rise while still being around 6 percent lower than in 2019. They also anticipate that the supply/demand imbalance that resulted in extremely strong vehicle net pricing and mix in 2021 will persist in 1H22. Increased production and rebuilt inventories, on the other hand, could lead to pricing, mix, and margin normalization in the latter half of 2022, putting original equipment manufacturers' (OEM) operating margins under pressure. Rigorous climate-related emissions rules, the rapid expansion of electric cars (EV), and the continuous development of driverless vehicles are other major developments to look out for in 2022. Tighter emission rules and government subsidies are expected to drive global EV sales next year.