The recent growth in new vehicle sales in China is not sustainable and expects a moderation in the foreseeable future, broadly in line with 5.2 percent growth in 2011, down from 40 to 50 percent growth in 2009 and 2010, according to Fitch Rating's report released over the weekend.
However, this should not have any immediate impact on European carmakers' ratings, the rating agency said in the report Friday.
A weaker and more competitive car market would weigh heavily on the profitability of some manufacturers, for whom China has been a significant source of earnings and cash over the past three to five years.
However, a decline in China sales due to lost market share or a contraction of the overall market for one to two years would be unlikely to trigger immediate downgrades, Fitch Rating said.
The companies most at risk are Daimler AG, with rating "A-"/Stable, and Volkswagen Group at "A-"/Stable, and both companies have sufficient headroom in their current ratings, the report said.
French automaker PSA's "BB+"/Stable failure to increase geographic diversification in line with its strategy could put pressure on its ratings and limit upside potential, but the risk is not specific to China.
Renault SA's "BB+"/Stable and Fiat SpA "BB"/Negative have marginal exposure to China and would thus be little affected by a slowdown.
Conversely, they are less well positioned to benefit from further expansion in China.
Reuters