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Ratings agency Moody’s has cautioned carmakers face a difficult 2018 amid a slowdown in major global markets and an expected further contraction in sales in the US market.

While Moody’s said the overall pace of growth should edge up slightly, from 1.3 per cent in 2017 to 1.5 per cent next year, lower net prices and a fall in capacity utilisation meant fundamental business conditions were likely to worsen in 2018.

“We have a negative outlook for global automakers in 2018 as auto sales are expected to decline in the US, while the pace of sales growth will slow in China, Western Europe and Japan”, said Falk Frey at the ratings agency.

The US market has already suffered a tough year, with sales estimated to have slipped 3.6 per cent in 2017, as loose financing conditions that had boosted sales fade, and used car prices come under pressure while more vehicles are returned following the end of leasing programmes. The pace of decline is at least expected to slow, though — sales are expected to drop only 0.6 per cent next year — as demand for replacement cars in the wake of recent hurricanes helps prop up orders.

In Western Europe, Japan and China, sales are still expected to grow overall, but currency, input and margin pressures are likely to take a toll, according to Moody’s, with only 2 per cent annual growth in Japan and China and 1 per cent in Western Europe, compared with more than 5 per cent, 3 per cent and 2 per cent respectively in 2017.

Continued uncertainty around the shift to low-carbon vehicles and the risk of rapid shifts in markets from new technologies also posed threats to carmakers, Mr Frey said.

Their suppliers should fare slightly better, however — the outlook for them is at least stable, according to Moody’s:

The outlook for auto parts suppliers in both North America and Europe is stable as earnings and revenues will continue to rise, though at a slower pace than in 2017.

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