Tesla is the global automaker best prepared for a low-carbon future, despite its junk credit rating, since it builds only electric cars, according to Moody’s Investors Service.
Fiat Chrysler is least prepared among the twenty automakers surveyed because of its shortage of electric cars and its reliance on big pickups and SUVs. In the long run, according to Moody’s, the business model for companies like Fiat Chrysler may be “fundamentally inconsistent’’ with the transition to a low-carbon economy.
These are highlights from the first-ever report in which Moody’s viewed the $516 billion in worldwide automotive manufacturing debt that it monitors through the additional lens of climate change.
“The significance and urgency of the efforts to reduce emissions in the passenger car fleet is evidence that carbon transition risk is already a material consideration for the creditworthiness of the sector,’’ according to Moody’s.
In a decade, according to the rating service, battery-only cars and plug-in hybrids should account for 25 percent of new vehicles sold globally. That’s because they’re indispensable for meeting strict new requirements for lower greenhouse gas emissions and improved fuel efficiency, especially in the EU and China.
“The clear direction of travel’’ among global regulators is toward tighter restraint, even if the U.S. trails behind, according to Moody’s.
Fiat Chrysler ranks with companies now deriving less than one percent of production from electric cars, the rating service said. The company also ranks with those who may miss their 2025 fuel efficiency targets in the U.S. by more than 50 percent, Moody’s said.
In its November 4 report, Moody’s relied on publicly available data from 2018. The rating service promised a series of updates, both for automakers and other industries, as concern grows among investors and regulators about climate change.
In March, the San Francisco Federal Reserve Bank warned that climate change “could threaten the stability of the financial system as a whole” and might even spark a full-blown panic.
Here five additional takeaways from Moody’s:
1. China, China, China: Electric car sales have sputtered in China recently as the government dials back consumer incentives. But the fundamental policy direction is clear and two Chinese companies, Beijing Automotive Group and Geely Automobile Holdings, rank among automakers firmly positioned for the low-carbon future, according to Moody’s.
2. Writing checks for R&D: Moody’s also describes Toyota, Honda, and BMW as strongly positioned. They earned this rating because of the number of battery-only cars and plug-in hybrids on their drawing boards, and their massive R&D spending. Nissan and Renault received high marks for research into self-driving and batteries but lost points because of a relatively smaller number of electric vehicles arriving in ten years.
3. Big pickups and SUVs: GM and Volkswagen earned high marks for the number of electric cars in their medium-term plans but were weighed down in other areas. VW lost points because it hadn’t even begun large-scale electric car manufacturing in 2018. GM, like Fiat Chrysler, relies heavily on big pickups and SUVs.
4. Catching Up: Ford ranked near Fiat Chrysler in most categories but avoided the bottom rank because it devotes a more significant portion of its revenue to R&D. Companies at the bottom will need a sharp increase in capital spending, according to Moody’s. Fiat Chrysler’s proposed merger with Peugeot-owner PSA may not help since PSA ranks 17th out of 20 in the survey.
5. Shopping in the Orient: Moody’s also ranked automakers on the extent to which they’ve lined up future supplies of components for electric cars. The supply of batteries themselves, Moody’s said, is already dominated by companies in China, Korea, and Japan.