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European Autos: Cyclical Downturn or Structural Shift?

Fitch Ratings hosted a conversation on the Auto sector with Emmanuel Bulle, Head of EMEA Manufacturing. During this brief discussion, Emmanuel covered the following topics:

  • Cyclical weakening of sales in key markets, including China,
  • Europe and the US Managing the challenge of electrification and meeting CO2 targets
  • Navigating an uncertain political backdrop including Brexit and further trade discussions
  • Flexibility in ratings given various challenges

Listen Now

Profits of Sino-Foreign Automaker Joint-Ventures Deteriorate

We expect leading JVs to resume yoy sales volume and revenue growth in 2H19 and to achieve stronger margins due to narrower price discounts and moderate promotions. However, overall profitability is set to trend down over the medium- to long-term on intensifying market competition and upcoming launches of low-margin new-energy vehicles (NEV).

Indian Automakers' Challenges to Persist After Weak 1Q

Domestic sales trends have weakened since 1HFY19 as the constrained liquidity at non-bank lenders reduced credit availability to buyers and the cost of ownership rose due to new regulations mandating enhanced vehicle insurance cover and additional safety features.

U.S. Tariffs Could Directly Affect 1 in 5 Mexican Corporates

The imposition of broad-based tariffs on U.S. imports of Mexican goods could have a direct negative revenue effect on 20% of Fitch Ratings' Mexican-rated corporates. However, depending on the duration and level of tariffs levied, there would also likely be indirect effects on Mexican companies linked to the broader macroeconomic repercussions of heightened trade tensions.

Automotive Slowdown Puts the Brakes on World GDP Growth

The slowdown in the global automobile market has had a material impact on world economic growth over the past nine months and has been a key driver of the global manufacturing downturn.

rating action

Fitch Downgrades Thomas Cook to 'CCC+'; On Rating Watch Negative

The downgrade reflects the tight liquidity we expect TCG to face towards the end of 2019 should it not sell its airline division or be able to draw on the planned GBP300 million senior secured facility based on the currently agreed mandate letter and term sheet.

Prolonged Chinese Auto Market Slowdown Could Affect Ratings

A prolonged Chinese auto market slump combined with structural trends reshaping the industry could affect the ratings of Jaguar Land Rover, Ford and General Motors. But a decline in Chinese new vehicle sales for only one to two years would be unlikely to trigger immediate downgrades.

PPP Accounting Understates Risks in Chinese E&C Companies

Active participation in PPP investments requires substantial debt funding and increases the liquidity risks of some of these companies, but their reported debt and cash flow accounts may not fairly reflect the associated risks due to their accounting choices.


Related Press Releases and Reports:
Unpacking Chinese Engineering and Construction Firms' PPP Investments
China's PPP Rules to Cool Infrastructure Investment
PPP Counterparty Risks in the Spotlight

Impact of 737 MAX Grounding in Asia May Worsen in 2Q

The impact on airline operations and airfares in Asia from the grounding of Boeing 737 Max jets has been largely muted so far, but could worsen from 2Q19 due to a seasonal pick-up in travel demand. Delays in the delivery of 737 Max planes, in case the re-certification process for the jet is prolonged, could allow some airlines to improve their balance sheets.

Revenue Stability, Capex Drive Asia-Pacific Ports' Ratings

Revenue stability, due to strong volume or price attributes, and resilience is underpinned by each port's importance to the economy and the strength of its catchment area, along with its competitive position. 

Rising EMEA A&D Cash Flows to Boost Shareholders Returns

Shareholder returns, including dividends and buybacks, increased 9% yoy in 2018 and we expect them to increase at an even greater rate each year in 2019-2020, driven by higher operating and free cash flows.

EMEA Carmakers Catching Up with Tesla, BYD in Electric Vehicle Race

European carmakers are refocusing their strategy towards electric vehicles and catching up with specialised manufacturers. Carmakers have increased investments in plug-in-hybrids and battery electric vehicles with numerous model launches expected in the next 12 to 24 months.

Global Airlines, Lessors Face Mixed 737 MAX Grounding Risk

The Boeing 737 MAX could be a concern throughout the aviation credit sector for much of 2019, according to Fitch Ratings.
ReportGlobal Airlines, Lessors Face Mixed 737 MAX Grounding Risk

Boeing 737 MAX Issue Could Have Broad Aviation Credit Effects

The Boeing 737 MAX could be a concern throughout the aviation credit sector for much of 2019. It is premature to take credit ratings actions at this time, as final conclusions about the Ethiopian Airlines and Lion Air crashes are not yet known, and there are many scenarios that could play out. Most concerning would be a harsh scenario including a systemic issue with the aircraft leading to lengthy groundings, material delivery delays, significant order cancelations and negative public sentiment toward the MAX. 

Global Suite of Auto Indices

Fitch Ratings offers quarterly index reports that compile and analyze our auto ABS ratings data. The auto indices track the collateral of Fitch-rated auto ABS transactions going as far back as 2004.

View the latest indices

Webinar on Demand

Risks to Watch in European Auto ABS

The European Auto ABS annualised loss index rose by 3bp to 0.34% in 4Q18, its highest level since mid-2014. The Fitch 30+ and 60+ Delinquency Indices increased by 4bp and 2bp relative to 3Q18, respectively.  Listen Now


Global Shipping - 2019 Outlook

Please join us for a webcast on December 4, 2018 on the 2019 outlook for the shipping industry. The presentation will be hosted by Angelina Valavina, Fitch’s lead analyst on the transportation and shipping sectors. 


Listen to the Webcast Replay of the Global Shipping Outlook 2019 presentation. 

EMEA Autos Break-ups Support Financials, Hurt Diversity

Plans to spin off some divisions announced by European auto manufacturers and suppliers could temporarily bolster financial structures and provide welcome financing for future investments. But it could also weaken their business profiles, notably due to reduced business diversification. 

rating action

Peugeot's Outlook Revised to Positive; Affirms at 'BB+'

The Positive Outlook reflects the strong and better-than-expected 2017 results, including the consolidation of loss-making Opel, and our projections that credit metrics will remain broadly commensurate with a low investment-grade rating in the medium-term. 

Electric Vehicle Growth Could See Oil Demand Peak By 2030

Electric Vehicle (EV) adoption is an increasing threat to oil demand, which could plausibly peak before 2030. This is not our core scenario, but developments in 2017 show how technological changes and greater product awareness could lead to annual sales of 10 million battery-powered EVs by 2025.

China Grand Auto's Equity Placement Rating Neutral

China Grand Auto's CNY8 billion equity issuance is marginally credit positive, as it will improve the company's liquidity position. That said, Fitch does not expect the equity proceeds to be used for debt reduction, thus FFO adjusted net leverage is unlikely to fall below 3.5x, the level at which we would consider positive rating action.

Credit Hotspot: Brexit

Latest: Brexit Impact Gradually Mounting for UK Corporates



Jill Zelter

Global Group Head & North America


Anjali Sharma

Europe, Middle East, Africa


Kathleen Fuentes Holtzman

Latin America


Sing Chan Ng



Matthew de Mendonca

North America


Sean Costello

Europe, Middle East, Africa


Aymeric Poizot

Global Group Head & Europe, Middle East, Africa


Ian Rasmussen

North America


Frank Laurents

Latin America


Helen Wong


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Craig Fraser

North America

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Joe Bormann

Latin America

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Paul Lund

Europe, Middle East, Africa

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Kalai Pillay

North Asia

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Vicky Melbourne

South Asia

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