Moody’s Changes Earlier Prediction for Auto Sales in the Coming Year – F, GM, HMC, TM

Due to an agonizingly slow rate of demand in Europe and rapidly dwindling sales in China, Moody's Investors Service has been forced to reduce its growth forecast for global auto sales in 2013. The growth in global light-vehicle sales was computed at 4.5% for next year, in the month of January 2012, but the figure has been brought down to 2.9%.

The growth rate of 2012 looks satisfactory at 4.4%. The ratings firm has stated that auto makers are revising and contemplating restructuring plans so that they can combat the problem of over capacity in Europe.

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Moody’s has predicted that Western Europe will experience a decline of 3% in terms of light-vehicle demand next year. Earlier, Moody’s had predicted a 3% increase in demand. Growth rates in Southern Europe markets will also plummet, especially in Italy. China was supposed to have a 10% increase in demand for light-weight vehicles according to the forecast in January, but now it will undergo a growth rate of only 8.5%.

The overall prospects for the auto sector will be steady and consistent for the next 12-18 months. The prospect will incline towards being positive, if the global light-vehicle growth rate can surpass 5% in the coming two years, pricing remains compact, and demand rates improve. The results could drastically differ and turn towards negative if the growth falls below 2%, demand rates become worse, or projected profit margins become weak.

Ford Motor Company(NYSE:F) shares slid 2%, General Motors Company(NYSE:GM) slid 1.20% to $23.80, Honda Motor Co Ltd (ADR)(NYSE:HMC) slumped over 4% and Toyota Motor Corporation (ADR)(NYSE:TM) lost 3%.