Automotive Capital Confidence Barometer

Access to capital

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To advance their strategic imperatives, automotive companies will take advantage of a continued increase in credit availability.

Over the last twelve months, automotive executives report their access to credit continues to improve, although this has only translated into a modest uptick in debt-to-capital ratios throughout the industry. This disciplined use of leverage ensures that companies are able to access the credit markets as they invest in both organic and inorganic growth initiatives.

Credit availability supports growth

The vast majority (88%) of automotive executives consider access to credit as stable or improving. Furthermore, the sentiment on declining credit availability nearly dropped in half compared to what it was twelve months ago. This confidence – coupled with positive views on the global economy and sound economic fundamentals – sets the stage for a robust dealmaking environment.

Q: Please indicate your level of confidence in credit availability at the global level

EY chart showing automotive executives’ confidence in credit  availability

Companies carefully manage debt-to-capital ratios

Following the Great Recession, automotive executives have become disciplined in their use of leverage. This discipline is expected to continue over the next twelve months with only 21% of respondents planning to increase their debt-to-capital ratios. Automotive companies with a well-managed capital structure will be able to opportunistically access credit markets as they undertake larger transactions to deliver growth.

Planned use of more debt and equity may signal shift to larger deals

The confidence to use more debt and equity to finance deals – even if that shift is modest – represents a move away from risk aversion and smaller, cash-based transactions. A willingness to use more leverage may also highlight increasing valuations and possibly larger deals to address growth mandates, while also signaling a return to a more active M&A environment.