Moody's downgrades VW on sector headwinds, Chinese competition: Report
The ratings agency noted in a statement that the downgrade reflects a recent contraction in operating margin and free cash flow generation, with limited expectation of a material recovery over the next quarters.
Moody's has downgraded Volkswagen from Baa1 to A3, on the back of sector headwinds, structural issues and competition from China, besides the ongoing investment requirements, Reuters reported.
The ratings agency noted in a statement that the downgrade reflects a recent contraction in operating margin and free cash flow generation, with limited expectation of a material recovery over the next quarters.
The difference in the downgrade is by a notch. It is still three notches above the junk category, Reuters reported.
The previous week, Volkswagen forecasted another challenging year of ramping up electric vehicle sales, curtailing costs and navigating trade tensions amidst intense competition with cheaper and faster rivals in China, the newswire noted.
The company is in the thick of major changes including new models and cost cuts in its two main markets of China and Germany, with earnings forecast to drop in China by up to 1 billion euros ($1.09 billion) in 2025.
"These measures, provided a successful execution could support an improvement in profitability by 2026/27," Moody's said in its statement.
It further noted that Volkswagen's robust balance sheet "with low leverage and very good liquidity ... gives the company time to implement strategic shifts and manage industry challenges."
RELATED ARTICLES
MAHLE Explores India Debut for AI Cabin System; Flags Rare-Earth-Free Motor Potential
German supplier sees India’s operating conditions, engineering capabilities and growing EV market creating opportunities...
MAHLE Sees Automotive OE Business Staying Flat; Bets on Aftermarket, Non-Auto Growth
German supplier expects Lifecycle and Mobility and new businesses such as data-centre cooling to drive growth, while the...
Sona Comstar Unveils ‘2.0’ Strategy, Targets Next Growth Wave Through Denso JV And Robotics
Auto component maker expands beyond electric mobility with a new Robotics and Physical AI vertical, while strengthening ...


17 Mar 2025
2327 Views

Mukul Yudhveer Singh