Global automotive: A modest rebound is on the cards, while trade frictions loom
Global automotive: A modest rebound is on the cards, while trade frictions loom
- After a modest 0.5% increase this year, we expect the global automotive industry to grow by 2.1% in 2025. This is supported by looser monetary policies and a gradual recovery in consumer spending.
- However, tariffs imposed by the next US administration are a downside risk for the industry.
- The long-term outlook for EV sales is still good, but trade frictions between the EU and China could impact sales.
US: Car production and sales have decelerated, with a bumpy start for EV sales
- After a 6.4% increase last year, US automotive output growth is forecast to decelerate to 3.8% in 2024 and 0.8% in 2025. After growing 14.6% in 2023, car sales are expected to increase by 2.8% in 2024 and by 3.7% in 2025.
- US sales of EVs remain below expectations. They are predicted to grow by only 9.5% year-on-year in 2024 (compared to a 24% increase globally). Some US automotive producers have delayed investments and production plans for EVs for the time being.
- If the incoming Trump administration implements its fiscal policy proposals, this would increase the profitability of automotive companies. However, any introduction of substantial tariffs on US goods imports could disrupt the global supply chains that automotive producers rely on, increasing the costs of imported components and materials.
China: Subdued domestic demand and tariffs weigh on the industry
- After increasing 14% in 2023, we expect Chinese automotive production growth to slow down to 5.2% in 2024 and to 1.0% in 2025. Lower consumer confidence is weighing on domestic car sales, which is now forecast to contract by 3% this year.
- In the domestic market performance in the EV and hybrid segments remains robust. However, the booming EV market has attracted many new players, which has led to fierce competition. A lot of smaller private-owned businesses are not yet breaking even due to high input costs and are heavily reliant on external funding by investors. Without continuous capital flow, those firms could quickly fail.
- The EU and other countries have recently imposed import tariffs on Chinese EV exports, which could affect local production and exports. It is still unclear to what extent the tariffs will drive production localisation towards Europe.
Europe: Higher credit risk for small and medium-sized suppliers
- We expect automotive production in Western Europe to contract by 3.9% in 2024, after growing 13% last year. A modest pick-up in consumer spending growth, supported by further monetary easing, should lead to a modest 1.6% rebound in 2025.
- We observe shrinking margins and increasing payment delays and insolvencies in major markets like Germany, Italy and the UK. Additionally, the shift away from internal combustion engines has started to reshape the industry and its competitive structure.
- Tariffs on automotive imports imposed by the next US administration are a downside risk for the industry, in particular for German carmakers and suppliers.
- Punitive tariffs on Chinese EV imports may slow the momentum of Chinese imports, giving European producers a window to launch a new generation of more competitive vehicles. However retaliatory tariffs on EU imports would hurt European manufacturers targeting the lucrative Chinese premium segment. And Chinese OEMs could also accelerate their plans to localise production in Europe.
For more a more comprehensive assessment of the performance and credit risk of the automotive industry please download the report below.
