Fitch expects global auto sales to rise, but warns of profitability risks

WEB DESK: Fitch Ratings has kept a ‘neutral’ outlook for the global automotive sector which indicates that production levels will remain stable with light vehicle sales expected to grow by around 2 per cent.

However, this growth won’t be spread equally, as markets in Europe and China face broader economic challenges.

Fitch pointed out that, despite modest growth pricing pressures will likely persist due to rising competition. “We expect pricing to remain subdued,” the agency said.

Looking ahead, Fitch predicts that interest rates will continue to fall in 2025 across most major markets, though the pace of decline will be slower in the US.

They also noted that, once uncertainties tied to upcoming elections in the US and Germany are settled, consumers may feel more confident and return to the market, especially with more attractive borrowing rates.

However, the shift in the vehicle mix, as more consumers re-enter the market, could create additional pressures on profitability. Moreover, European manufacturers will likely face financial strain due to ongoing restructuring of their production footprint.

The rise in protectionist policies around the world could further complicate efforts to restructure, particularly for original equipment manufacturers (OEMs).

While most global OEMs and tier-1 suppliers have localised production, factories in Mexico and Canada could face new tariffs if Donald Trump returns to office adding to the existing tariffs already placed on US and European manufacturers in China.

As for electric vehicles (EVs), growth continues across many regions but has started to slow down in the US and Europe. This is due to concerns about driving range and falling resale values, as rapid advancements in technology and increasing competition challenge the market.

Fitch doesn’t expect a significant increase in EV sales in 2025, noting that government subsidies and regulations aren’t enough to alleviate these concerns.

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