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
JLR Takes BYD to Court Over Alleged Defender Technology Theft
Jaguar Land Rover has initiated legal proceedings against BYD after suspecting the Chinese automaker reverse-engineered ...
Suzuki Motor Corporation Posts 19.4% Revenue Rise in H1 FY2026, Operating Profit Dips on Forex and Input Cost Pressures
India-driven volume growth lifts consolidated revenue to ¥3,419.2 billion in the first half of FY2026, even as operating...
Synopsys and Infineon Extend Partnership to Enable Virtual Software Development for Automotive Microcontrollers
The two companies have released a virtual development kit for Infineon's AURIX RC1 microcontroller, allowing automotive ...



17 Mar 2025
Autocar Professional Bureau

Angitha Suresh