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
Anand Mahindra Tells Graduates to Pair Adaptability with 'Deeply Human' Skills as Auto Leaders Deepen Education Push
Mahindra Group chairman emphasizes ethics and adaptability for graduates at Mahindra University campus.
Weekly News Wrap: Mahindra’s CV Restructuring & New Unicorn, Strong July Sales, L&T’s EV Bet
The week saw major corporate restructurings, capacity expansion pushes across passenger and commercial vehicle segments,...
Renault India July Wholesales Rise 27.9% to 3,293 Units
The automaker recorded its eleventh consecutive month of double-digit year-on-year wholesale growth, supported by sustai...


17 Mar 2025
2344 Views
Shahkar Abidi

Autocar Professional Bureau