MEDIUM RISK for entreprises
The most pressing threat ahead of Europe’s car industry isn’t Brexit or potential U.S. tariffs. It’s the EU’s own regulations for limiting carbon dioxide emissions.
After hitting a 10-year high in 2017, global average Days Sales Outstanding fell by -1 day to 65 days in 2018, a sign of companies taking a cautious approach to their clients’ payment behavior.
Electric vehicles are the disruption of the century and how countries adapt to electrification will be key to the survival of their auto industries. But some have made more progress than others.
World trade growth appears to be the main driver for transportation of any kind whatsoever, although the requirements of people transportation strongly differ from those of goods transportation. In volume terms, world trade growth amounted to +3.9% on a yearly average in 2018, down from +4.8% in 2017. The new item is that we expect global trade growth still to be positive although at a slower pace to +3% in 2019, in other words (at) a not that much supportive background, without even taken into consideration tariffs looming worldwide.
Because of its flexibility and its simplicity, road transport is usually used to carry goods nationwide and takes the lion’s share (around 70%) of the transportation market as a whole. However, road transport companies have to pay attention to higher costs associated with truck drivers’ wages because driver availability remains one of the biggest challenges facing the trucking industry, especially across North America. The good news is that a high fleet utilization, coupled with solid enough trade growth, should keep profitability at a favorable level in 2019. The bigger the country, the most favored rail transport is. So, railroad traffic may cash in on the same uptrend as road transport, in addition to higher demand in commodities in America and Eurasia. Besides, the tight trucking market is currently bolstering North America’s railroad traffic, expected to go up +3% in 2019.
The marine shipping industry has coped with the impact of new emission regulations (IMO 2020) on the fleet and the risk of rising protectionism hitting global trade. Dry-bulk and tanker operators are working in a more balanced market, with supply growth expected to be mostly in step with demand in 2019. The liner market, which remains awash with excess capacity, could give up some recent rate gains following additional US tariffs in Chinese imports. Meanwhile, air transport keeps enjoying a rising demand in air passenger travel even if some big airlines have started complaining about low-cost airlines’ fierce competition over long-haul routes.
Road transport: High degree of fragmentation among road transport firms, especially in East Europe
Rail transport: The larger the country, the better for rail transport and infrastructures
Air transport: Cost-based competition of low-cost airlines curtailed by upstream supply chain bottlenecks
Maritime transport: Overall Asian demand on the rise, helping the shipping sector be resilient
Contact Euler Hermes
Economic Research Team
Sector Risk Analyst