November 2023

Industry trends
Automotive
Pressure on householdincomes is weakening
demand, although
EV sales are gaining
momentum

Global overview
Automotive output is enjoying a surge thisyear and is expected to increase 10.6% by
the end of 2023. Motor vehicle and parts
production accelerated during the firsthalf of the year, largely due to an easing of
the supply chain disruptions and working
through the backlogs of orders.
However, we expect production growth
to slow to 2% in 2024, as weaker demandtakes hold of the industry, particularly inadvanced economies. Persistently highinterest rates are weighing on automotive
production and sales, as household incomesremain under pressure and financing has
become more costly. In addition, once thebacklogs of orders are worked through,there will be lower demand for automotive
production in 2024 and 2025. Downside
risks for the sector are tenaciously highinflation, while component shortages could
also add strain to automotive supply chains.

We expect global hybrid and electric vehicle(EV) sales to account for 59% of global lightvehicle sales by 2030, up from 10% in 2020.
The US Inflation Reduction Act will support
EV sales in the US, while in Europe the shift
towards electrification is accelerating. In
China, the EV transition maintains a strong
momentum, and Chinese EV exports areaccelerating.

Asia and Oceania

AmericasIndustry performance forecast
Europe1Austria

Netherlands

Australia

New ZealandBrazilBelgium

PolandChina

Phillippines

CanadaCzech Republic

PortugalHong Kong

Singapore

MexicoDenmark

Slovakia

India

South Korea

USAFranceSpain

Indonesia

TaiwanGermany

SwedenJapan

ThailandHungary

Switzerland

Malaysia

VietnamIrelandTurkeyItaly

UK

Excellent
The credit risk situationin the sector is strong /business performance in the
sector is strong compared toits long-term trend.
Good
The credit risk situationin the sector is benign /business performance in the
sector is above its long-term trend.
Fair
The credit risk situationin the sector is average /business performance in the
sector is stable.
Poor
The credit risk in the
sector is relatively high /business performance in the
sector is below its long-term trend.
Bleak
The credit risk in the
sector is poor / businessperformance in the sector is weakcompared to its long-term trend.

November 2023

Industry trends
Automotive
Motor vehicles
and parts output

2022

2023*

2024*

2025*

Global registrationof new light vehicles

2022

2023*

2024*

2025*

Global

4.5

10.6

2.0

2.7

Global

-0.7

6.5

4.3

3.8

Americas

5.7

8.6

2.7

1.2

Combustion
engines vehicles

-8.9

-2.0

-5.9

-4.0

Asia-Pacific

4.6

10.7

1.8

3.6

Electric vehicles

30.8

32.4

18.2

Europe

2.6

13.1

1.6

2.3

Hybrid vehicles

37.5

23.2

15.7

62.4

18.5

Year-on-year, % change /*forecast – Source: Oxford Economics

Year-on-year, % change /*forecast – Source: Oxford Economics

Strengths and growth drivers

Constraints and downside risks

Emerging markets. Low vehicle density and a growing middleclass in emerging markets is driving demand, especially in Asia.

Geopolitical risks. The sector relies on a global network ofsuppliers and is vulnerable to protectionism, tariffs anddisruptions.

Green transport. New model launches and ranges, decreasing
prices, purchase incentives and CO2 reduction policies will drive
demand.
New technologies. Level 3 self-driving cars will hit the roads in
2023. McKinsey predicts the autonomous driving car market could
reach sales of USD 400 billion by 2035.

Advanced market demographics. High vehicle density and aging
populations imply a decrease in future demand.
New players. Tech companies and start-ups are disrupting theEV market, creating new competitors for traditional automotivemanufacturing.
Supplier obsolescence. Manufacturers of combustion engine
vehicle parts will need to change or face extinction.

2

November 2023

Automotive outlookAmericas
North America: Automotive key figures2022

2023*

2024*

2025*

Production index (real)

5.6

9.7

2.6

1.1

Gross output (sales) (real, USD)

-0.1

13.3

2.3

1.2

Investment (real, USD)

7.1

9.9

2.2

2.7

CanadaGross operating surplus(profits), (nominal USD)

14.4

17.9

-0.3

1.3

MexicoYear-on-year, % change /*forecast – Source: Oxford Economics

We expect automotive output to increase
9.6% in 2023, followed by a 4.3% increasein 2024, supported by a steady recovery ininventories and order backlogs. However,ongoing industrial action in the industryis a major downside risk to this outlook.
Car sales are forecast to grow 13.3% in 2023,
slowing to 2.3% in 2024. However, both years
represent growth after the 9.6% contraction
seen in 2022.
This slowdown in growth is likely to lastthrough much of 2024. However, the longerterm growth outlook is fair, buoyed in largepart by growing demand for electric vehicles
and government support for green industry.

3Brazil

USA
Excellent
The credit risk situation in thesector is strong / businessperformance in the sector is strong
compared to its long-term trend.

USAAfter a surge this year, the USA’s automotive
growth will be modest moving forward
through 2024 and 2025.

Industry performance forecast

Inflation Reduction Act
In the mid-and long-term, the Inflation
Reduction Act will support EV production
and sales growth and is likely to attract
significant new investment. The Act aims toreduce reliance on imports and to encourage
domestic investment in areas such asbatteries and chips. The new rules will award
credits based on the location of battery
components and minerals production
domestically or in countries that are USfree trade partners. Investment is alreadyunderway in battery and EV productionin North America, even at the expense ofinvestment in other regions.

GoodThe credit risk situation in thesector is benign / businessperformance in the sector
is above its long-term trend.
Fair
The credit risk situation in thesector is average / businessperformance in the sector
is stable.
Poor
The credit risk in the sector
is relatively high / businessperformance in the sector
is below its long-term trend.
Bleak
The credit risk in the sector ispoor / business performancein the sector is weak compared
to its long-term trend.

November 2023

Automotive outlook
Asia PacificAsia Pacific: Automotive key figures

2022

2023*

2024*

2025*

Production index

4.6

10.7

1.8

3.6

Gross output (sales) (real, USD)

4.1

11.2

1.3

3.6

Investment (real, USD)

5.7

13.8

1.9

3.2

Gross operating surplus(profits), (nominal USD)

-13.5

1.0

0.2

12.1

Year-on-year, % change /*forecast – Source: Oxford Economics

Industry performance forecast
Australia
China
Hong KongIndia
Indonesia

China
Although domestic demand remains
sluggish amid weaker economic conditions
and low consumer confidence, growth in theEV segment is strong.
We expect Chinese automotive output togrow by 9.7% in 2023 and 4.0% in 2024,
largely supported by export growth.
Domestic car sales are forecast to increase
annually by only 0.9% in 2023 and 2024.
A severe property market downturn
remains a downside risk.
EV growth is robust, with local brands
increasing their domestic market shareand expanding overseas. The current
tax incentive on passenger cars has been
extended until end of 2027 for electricvehicles, with a phased reduction in support.
However, the booming of EV market has
attracted many new players, leading toincreasing competition. A lot of smaller
businesses are not yet breaking even dueJapan high input costs and are heavily reliant
toon external funding by investors. Without
continuous capital flow, those firms could
quickly fail. Additionally, the EU Commission
has started an investigation into alleged statesubsidies for Chinese EVs, and is threatening
to impose punitive tariffs on imports.
Long-term outlook is good
The long-term outlook for production andsales is good, thanks to the enormous
market potential. Low market saturation
and a growing middle-class provide many
opportunities for new sales. In China, theaverage level of car ownership amounts toabout 200 cars per 1,000 people (comparedwith about 800 cars per 1,000 people in the US).

Malaysia
New ZealandPhillippines
Singapore
South Korea
TaiwanThailand
Vietnam
Excellent
The credit risk situation in thesector is strong / businessperformance in the sector is strong
compared to its long-term trend.
GoodThe credit risk situation in thesector is benign / businessperformance in the sector
is above its long-term trend.
Fair
The credit risk situation in thesector is average / businessperformance in the sector
is stable.
Poor
The credit risk in the sector
is relatively high / businessperformance in the sector
is below its long-term trend.
Bleak
The credit risk in the sector ispoor / business performancein the sector is weak compared
to its long-term trend.

4November 2023

Automotive outlook
EuropeEurope: Automotive key figures

2022

2023*

2024*

2025*

Production index

2.6

13.1

1.62.3Gross output (sales) (real, USD)

5.3

12.3

1.4

2.3

Investment (real, USD)

6.1

13.0

2.6

4.2

Belgium

Gross operating surplus(profits), (nominal USD)

-7.7

27.1

3.0

3.9

Czech RepublicYear-on-year, % change /*forecast – Source: Oxford Economics

Industry performance forecast
Austria

Denmark
FranceEurope
Despite lower inflation and a gradual
recovery in real wages, increased interest
rates continue to dampen consumer
spending and investments.
Although we expect automotive outputin Europe to increase by 13% in 2023,order backlogs have started to decrease
substantially over the past couple of months,
and economic conditions remain weak. We
expect both production and car sales growth
to decrease sharply in 2024. Persistently
high inflation and component shortages
remain downside risks.
Growth of electric vehicles in Europe
So what about electric vehicles, can thesedrive the industry in the same way as they
are predicted to do in the USA and China?
Currently high pricing and a lack of charging

Germany
infrastructure make EVs less appealing inthe short term, but we expect this segment togrow strongly in the mid-term and longer.

HungaryThe share of hybrid and light EV productionin the eurozone is forecast to reach 80%of total automotive production by 2027,
compared with a 50% share of this segment
globally.

Italy

However, favourable subsidies under theUS Inflation Reduction Act have raisedcompetitiveness concerns. And the shift
away from internal combustion engines will
reshape the industry and its competitive
structure in Europe. This poses a major
challenge for the bulk of small-and mediumsized suppliers.

Portugal

IrelandNetherlands
PolandSlovakia
SpainSwedenSwitzerland
TurkeyUKExcellent
The credit risk situation in thesector is strong / businessperformance in the sector is strong
compared to its long-term trend.
GoodThe credit risk situation in thesector is benign / businessperformance in the sector
is above its long-term trend.
Fair
The credit risk situation in thesector is average / businessperformance in the sector
is stable.
Poor
The credit risk in the sector
is relatively high / businessperformance in the sector
is below its long-term trend.
Bleak
The credit risk in the sector ispoor / business performancein the sector is weak compared
to its long-term trend.

5November 2023

Atradius
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P.O. box 8982 · 1006 JD Amsterdam
The Netherlands
Phone: +31 (0)20 - 553 91 11
info@atradius.com
www.atradius.com

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