The firm said it has raised its forecast from its February figure of 2.3% mainly because of higher-than-expected demand in China.

It added that it anticipates that demand growth will accelerate in 2014 to 4.8%, compared with its forecast of 4.9% previously. Our stable outlook for the global auto industry has been in place since September 2011.

The firm has revised its Chinese 2013 and 2014 demand slightly higher, as the market outperforms economic growth. Chinese car market growth continues to be above GDP growth rates and Moody’s its it is revising upward its forecast for light vehicle demand growth to 10% from our January expectation of 7% growth for both 2013 and 2014.

European light vehicle sales broadly unchanged but individual country performance varies. The company said it continues to forecast European light vehicles sales to decline 5.0% on the year in 2013. Its lower expectations for France and Italy are offset by stronger-than-expected growth in the UK. Moody’s added that it believes that western European light vehicle demand will have reached a trough in 2013 and will rebound by 3% in 2014, which is lower than its previous forecast of a 5% increase in demand but is not anticipated to signal an upward trend.

The firm added that it’s seeing rising risks for light vehicle demand growth in Brazil and Russia. Light vehicle demand in Brazil is losing momentum in the face of rising interest rates, high inflation and an increasing indebtedness of private households. European Original Equipment Manufacturers (OEMs) need these markets in order to mitigate losses in western Europe.

It added that manufacturers’ profit margins continue to diverge, commenting: ‘The margins of Renault SA (Ba1 stable), Peugeot SA, or PSA (B1 negative) and Fiat SpA (Ba3 negative) will remain under pressure because of overcapacity and low demand in western Europe. This will also continue to weigh on German OEMs’ margins, although their margins remain more solid. Japanese manufacturers’ margins will continue to recover from their lows after the 2011 earthquake and tsunami, supported by a weakening yen that should also fuel market share gains. We expect US manufacturers to retain similar margins in the next 12-18 months but tougher competition, slower US growth and continued, albeit reduced, losses in Europe may cause them to erode slightly.’

Moody’s concluded by saying it would consider revising the outlook to positive if its global light vehicle growth forecast exceeded 5% in the next two years. This assumes that capacity would not outgrow demand and that utilisation rates and pricing remained firm, especially in Europe.

However, it would revise the outlook to negative if global volume growth falls below 2%, net pricing declines and capacity utilisation rates deteriorate, or if it expects operating profits to decline for any other reason.

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Chinese demand prompts rise in sales growth, says Moody’s

Moody’s has released its latest industry outlook, maintaining its stable outlook for the industry in line with its forecast of global light vehicle sales growth of 3.2% in 2013.

The firm said it has raised its forecast from its February figure of 2.3% mainly because of higher-than-expected demand in China.

It added that it anticipates that demand growth will accelerate in 2014 to 4.8%, compared with its forecast of 4.9% previously. Our stable outlook for the global auto industry has been in place since September 2011.

The firm has revised its Chinese 2013 and 2014 demand slightly higher, as the market outperforms economic growth. Chinese car market growth continues to be above GDP growth rates and Moody’s its it is revising upward its forecast for light vehicle demand growth to 10% from our January expectation of 7% growth for both 2013 and 2014.

European light vehicle sales broadly unchanged but individual country performance varies. The company said it continues to forecast European light vehicles sales to decline 5.0% on the year in 2013. Its lower expectations for France and Italy are offset by stronger-than-expected growth in the UK. Moody’s added that it believes that western European light vehicle demand will have reached a trough in 2013 and will rebound by 3% in 2014, which is lower than its previous forecast of a 5% increase in demand but is not anticipated to signal an upward trend.

The firm added that it’s seeing rising risks for light vehicle demand growth in Brazil and Russia. Light vehicle demand in Brazil is losing momentum in the face of rising interest rates, high inflation and an increasing indebtedness of private households. European Original Equipment Manufacturers (OEMs) need these markets in order to mitigate losses in western Europe.

It added that manufacturers’ profit margins continue to diverge, commenting: ‘The margins of Renault SA (Ba1 stable), Peugeot SA, or PSA (B1 negative) and Fiat SpA (Ba3 negative) will remain under pressure because of overcapacity and low demand in western Europe. This will also continue to weigh on German OEMs’ margins, although their margins remain more solid. Japanese manufacturers’ margins will continue to recover from their lows after the 2011 earthquake and tsunami, supported by a weakening yen that should also fuel market share gains. We expect US manufacturers to retain similar margins in the next 12-18 months but tougher competition, slower US growth and continued, albeit reduced, losses in Europe may cause them to erode slightly.’

Moody’s concluded by saying it would consider revising the outlook to positive if its global light vehicle growth forecast exceeded 5% in the next two years. This assumes that capacity would not outgrow demand and that utilisation rates and pricing remained firm, especially in Europe.

However, it would revise the outlook to negative if global volume growth falls below 2%, net pricing declines and capacity utilisation rates deteriorate, or if it expects operating profits to decline for any other reason…