Real distress: is the crisis in the automotive industry really getting worse, or is it a momentary slowdown?
In light of the period and the many changes in it, starting with a shortage of spare parts that has not yet ended, through a transition to the consumption of electric vehicles and the adjustment of the market, the increase in financing costs for the purchase of a vehicle following a recent dramatic increase in interest rates and the depreciation of the shekel these days - this situation is expected to lead to an increase in the prices of new vehicles, a general slowdown in the economy and lower private consumption.
In light of this, Dun & Bradstreet predicts that even in the automotive industry, although it is considered a non-high-risk industry, there will be a slowdown and erosion in profitability in 2023. Although the month of January ended with good results, it seems that it was still affected by previous deliveries and demands from 2022.
The automotive industry, and especially the leasing segment, suffers from high exposure to changes in interest rates, when companies in the industry have high capital needs in order to equip and maintain their vehicle fleets, and therefore the company anticipates that the main challenges in the industry will be faced by these companies.
Due to the reduction of employees in quite a few companies in the economy as well as in the fields and private car dealers, where there has been a jump and a high opening of businesses, the expectation is that 25% of those involved in the above-mentioned sub-field will not survive the coming year, either they will run into difficulties or they will stop the activity completely .
Dunn & Bradstreet say that the year 2023 began with a storm in terms of the amount of deliveries, when in January 2023 over 47,000 new vehicles were delivered, a figure close to the record for deliveries in a single month.
The trend will continue
According to Roital Roth, director of the analysis department at Dunn & Bradstreet, "the combination of high inflation, the increase in financing costs for both the business and private sectors, and the expected decrease in private consumption caused, starting in the second half of 2022, an increase in the level of general risk in the economy. In our estimation, this trend is expected to continue in 2023".
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