(Finance) – Growing trade tensions in the electric vehicle (EV) sector suggest the risk of further barriers for Chinese car manufacturersand Fitch Ratings expects them to adapt by increasing the investments in alternative markets and diversifying production to ensure growth and profitability in an evolving global landscape. According to the rating agency, capex and equity investments in partnerships will increase and weigh on cash flows.
The growing obstacles facing electric vehicle exports could also intensify competition and accelerate the shift towards electric vehicles in the internal market Chinese. This in turn would exacerbate the risks of further market share losses of internal combustion engine vehicles (ICEVs) and harm the profitability of some of the Chinese automakers and their global JV partners.
Fitch believes it is likely that automakers will diversify production facilities globally, a trend in recent years. As well as building manufacturing facilities in the EU and neighboring countriesautomakers could increase investment in markets with lower trade barriers and train joint venture with local partners to overcome regulatory uncertainty.