Poorly performing Auto Loan ABS has the potential to put the brakes on bond holder returns and automaker cashflow

In developed markets, the automotive sector is rapidly transitioning to Battery Electric Vehicles (BEVs), supported by tailpipe emissions policy and country-level emissions reductions targets. Almost every major automaker is rolling out BEVs, effectively legitimising the market. As the automotive energy transition gathers pace, who will buy an internal combustion engine (ICE) vehicle once battery electric vehicles become widespread?

In this report, Ben Scott, our senior automotive analyst, looks at how the transition to BEVs will affect the rapidly growing Global Auto ABS market, set to hit a quarter of a trillion dollars annually in the next 5 years. Using his “wheel of misfortune” he looks at how the transition will raise the level of risk to bond investors, how it may impact the capital structure of the OEMs themselves, and how it is likely to accelerate the transition away from ICE vehicles. This will leave lagging OEMs with falling sales, margins and cashflows to make up lost ground, all much sooner than currently thought.

Ben also looks at the challenges and opportunities for ‘green’ Auto Loan bonds, giving practical suggestions on how investors may approach to sifting out the ‘green’ from the ‘greenish’ and ‘brown’.

If you are an investor, analyst, Auto OEM, parts supplier, or any part of the financial/ production value chain, this report is for you.

If you have follow-up questions, please contact Ben directly on bscott@carbontracker.org.