Moody's maintains positive outlook on auto sector

27th January 2011, Comments 0 comments

The international ratings agency Moody's Investors Service said Thursday it would maintain a positive outlook on the auto sector even though "earnings momentum is losing speed."

"Moody's maintains a positive industry outlook for global automotive manufacturers based on a continued rise in demand in the US, China and other emerging markets," a statement said.

The outlook was valid for the next 12-18 months, senior vice president Falk Frey told a press briefing in Frankfurt.

Following very strong profits in 2010 however, company earnings were expected to see their momentum slow down.

"It is unlikely that the industry will maintain the profit improvements seen in 2010," Frey said, adding that French manufacturers like Renault and Peugeot would find the going tougher in particular.

That is because they are focused on their domestic market and depend also on sales in neighbouring countries, which are expected to slow following the expiration of cash-for-clunkers auto subsidies.

French car makers have also pumped a lot of money into developing electric vehicles, and their profits "will be limited due to the high investment costs involved," Frey said.

Competition in the small car segment will increase meanwhile, while rising commodity prices and a weaker global economic outlook could also put pressure on automaker's profits, he added.

© 2011 AFP

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