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Credit ratings agency Moody’s have changed their outlook for the automotive industry to stable from negative, citing an expected pick up in demand in 2021 as one of the reasons behind the move.

The change was made earlier this month after Moody’s concluded that demand had bottomed out. However, the rating agency warn that a „rebound to pre-downturn levels will be slow, with considerable downside risk.”

Moody’s believe that the automotive industry is in better shape as a result of cutting costs aggressively and embracing restructuring. Inventory levels have been trimmed too, while cash-preservation strategies have been another influential factor in the industry’s recovery.

According to the well-known credit ratings agency, the automotive industry’s quick reaction to the pandemic meant that production could start again without major hiccups, while supply chain interruptions turned out to be no worse than forecast:

„Instead of encountering major issues, production restarts were largely smooth, and disruptions in the supply chain were no worse than expected.”

Looking forward to the future, Moody’s believe that the pandemic will act as a catalyst for the localisation of supply chains. They also expect more focus on workplace safety as well as a drive towards electric vehicles as governments introduce subsidies to encourage decarbonisation:

The pandemic will hasten the auto industry’s localization of supply chains and reduce production capacity amid a heightened focus on workplace safety. It will also accelerate the sector’s shift to electrified vehicles as governments use stimulus measures to support decarbonization goals.

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