German carmakers could make competitive gains in the industry’s transformation to electric vehicles over the coming few years, S&P Global Ratings said Monday.
“We think Germany’s premium car segments will be able to leverage their strengths of higher profitability and somewhat lower sensitivity to demand shocks than mass producers,” said S&P Global Ratings credit analyst Tobias Mock in a report entitled German Carmakers Can Still Win The Electrification Race – At A Cost.
But the heavy research and development costs for developing these cars, and extra investment in supply chain and technology developments, will weigh on profitability in the coming years, according to the report. “Disruptive industry trends and the deterioration of market conditions globally may also strain their profitability over a prolonged period and trigger rating transition,” said S&P Global Ratings credit analyst Vittoria Ferraris.
The three big premium automakers Volkswagen, BMW and Daimler held only 12.5% of the fully electric-car market in 2018. But plug-in hybrids and mild hybrids are also key in their strategy to meet increasingly more stringent emissions regulations, the analysts said. By the end of this year, the three automakers will offer at least one fully battery electric vehicle (BEV) and at least one plug-in hybrid electric vehicle (PHEV) in nearly all their existing models — totaling 38 electrified models. They plan to launch another 23 models next year, according to the report.
“While US automaker Tesla is currently the bestseller in the premium electric vehicle (EV) market, we expect German carmakers will exert a strong challenge by building on their brand reputation, ability to produce high-quality cars at scale, and consumer loyalty,” the analysts wrote in the report.
The report does not constitute a rating action, the analysts said.
— Diana Kinch
