HONG KONG, 12 August 2021. Pengyuan International (“PENGYUAN”) has today released its Industry Credit Guidelines for Global Automobile Manufacturers.

PENGYUAN’s Industry Credit Guidelines for Global Automobile Manufacturers describe our analytical approach in evaluating the creditworthiness of automobile original equipment manufacturers (also commonly known as auto OEMs). The criteria are built on top of the rating framework presented in PENGYUAN’s General Corporate Rating Criteria. In order to more precisely reflect the risk profile of auto OEMs, PENGYUAN makes some adjustments to our General Corporate Rating Criteria on weightings allocated to sub-factors of the operation profiles and makes sales volume a primary factor in assessing operating scale. For auto OEMs with material captive finance operations, we also assess how such operations affect the OEMs’ business profile, financial profile and the overall credit profile.

In comparison with the Request-for-Comment version of the Guidelines, PENGYUAN has made the following major changes, in addition to other minor and editorial changes on the basis of internal comments. To begin with, PENGYUAN has introduced additional auto manufacturing sector-specific macro environment factors when assessing the macro environment risk. Secondly, PENGYUAN has acknowledged young new energy vehicle (NEV) OEMs that add to the auto manufacturing industry’s concentration risk, environmental, social and governance (ESG) factors and technological evolution that add to the entry barrier risk, as well as the increasingly popular ride hailing and car sharing concept that add to the growth perspective risk. Thirdly, when assessing an auto OEM’s Operations Profile, PENGYUAN has acknowledged product reviews and order backlogs as gauges of the OEM’s Products factor, quantifiable R&D metrics, such as R&D expense ratio, as additional gauges of the Technology factor, and ESG events as additional gauges of the Brand Image & Market Share (BIMS) factor.

Last but not least, in the published version PENGYUAN has incorporated the consideration of auto OEMs’ captive finance operations and their impacts on the operational and financial well-being of the parent OEMs. Apart from excluding captive finance operations’ financials from our financial analysis on OEMs to better reflect the financial profile of OEMs’ core business, PENGYUAN has also summarised the methodologies for considering whether the captive finance operations would materially affect an auto OEM’s Financial Profile in the “Adjustments in the financial profile analysis to account for auto OEMs’ captive finance operations” section, as well as other potential score adjustments in the “Adjustment Factors” section.

These guidelines will be effective immediately on the date of publication and we intend to complete the review of all affected ratings within the next six months.
For more details on the guidelines, please visit: https://www.pyrating.com/methodology/in-use-criteria.html

ANALYSTS CONTACT
Primary Analyst
Vincent Ha, CFA
+852 3615 8307
vincent.ha@pyrating.com
Secondary Analyst
Ke Chen, PhD
+852 3615 8316
ke.chen@pyrating.com
Committee Chair
Brian Lam
+852 3615 8339
brian.lam@pyrating.com
MEDIA ENQUIRIES
Charley Lui
+852 3615 8296
charley.lui@pyrating.com
RATING SERVICES ENQUIRIES
Allen Wei
+852 3615 8324
allen.wei@pyrating.com
Additional information is available on www.pyrating.com

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