Falling Demand Earns Auto Industry A ‘Negative’ Status By Moody’s
Weak demand for vehicles has led to credit rating firm Moody’s cutting down its outlook of the automobile industry from steady to negative. Due to multiple factors like slowdown in the economy, political issues in the country and surprisingly good end to 2018 Moody said in its research report that global auto market is likely to be damp in 2019. Moody stated that global sales of light vehicles will fall by more than half this year and predicts that automobile sales in 2019 will grow by a slow margin of just 0.5 %.
This is a comedown from its previous prediction of 1.2 % that was based on strong last quarter of 2018 and Moody’s forecast of auto industry’s growth for 2020 is at 0.8 %. It is expected that sales of automobiles are likely to fall rapidly during first half of 2019 and then regain lost ground towards end of last two quarters. It said that though global economic growth is likely to be slow, developing markets like China are going to witness strong growth. Sales across US are likely to drop by 3 % during 2019 and by 0.6 during 2020 due to scarcity of financing resources which had supported the sales of new automobiles till now.
Threats like import tariffs and Brexit are looming risks on the horizon due to their uncertainty and industry is facing declining sales at a time when firms are making a beeline to invest in new technology like connected cars, self-driving cars and enhanced safety features. Auto manufacturers are also facing stringent emission guidelines that have forced them to investment in new and expensive technology like hybrid and electric personal vehicles and commercial vehicles. Auto industry is walking a tightrope between falling sales and need to implement new technology to meet government regulations and meet demands of customers.