MEDIUM RISK for entreprises
Since 2017, the sector has seen more than 30 major insolvencies on average per year.
The “Allianz Euro Fragility Index” captures the systemic tail risk of a Eurozone breakup.
A recession was avoided in 2019, but no rebound is on the cards for 2020.
What to Watch?
The Automotive market is on course to cross the 100 million units’ threshold in 2019. In 2018, global sales in new vehicles should exceed 98 million, posting a +2.5% increase. Positive forecasts in private consumption and corporate investment, fueled by rising incomes and still low interest rates, will support new registrations in passengers’ cars (74% of the total) and commercial vehicles (26%) in the majority of countries.
Yet, the automotive industries face challenging times. One issue is their ability to cope with the uneven tempo of markets. We expect a continued growth in China (+3% to almost 30mn units) and most of the European Union (+2%), a recovery in Russia (+5%) and Brazil (+3.5%), a stabilization in Japan and South Korea, but also two major exceptions: the U.S (-2% to 17mn units) and the UK (-6%). The second challenge is to manage market’s transition, notably to EV and connected cars, while keeping on meeting each market demand and the diversity of regulatory frameworks. New models are crucial to stay competitive, from low costs to premium cars and all kinds of EV; the latter will keep on a double digit trajectory with 1.7mn registrations in 2018 and a fleet of 5mn cars (compare to a total of 1.4bn vehicles in use worldwide). At the same time, emission requirements are intensifying, increasing the costs of cars and the pressure on manufacturers, notably in China where the draconian new rule coming into force in 2019 is undoubtedly already a game changer for car makers.
Car makers: Geographical diversification and (innovative) model launches remain a key strategy to protect profitability and cope with the massive investments and R&D spending. High pressure from global competition and expansion of out-sourced activities
Auto suppliers: Higher revenue growth and profitability compare to car makers. Market’s transition to increase content per car and opportunities, but to reduce drastically the need for some components (i.e. diesel)
These assessments are, as always, subject to the disclaimer provided below.
This material is published by Euler Hermes SA, a Company of Allianz, for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by Euler Hermes and Euler Hermes makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of the Euler Hermes Economics Department, as of this date and are subject to change without notice. Euler Hermes SA is authorised and regulated by the Financial Markets Authority of France.
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