European Auto ABS: Auto EPCs on a Diverging Road

The commentary reviews the environmental information disclosed by European originators of auto asset-backed security (ABS) transactions and stored in the European Datawarehouse. The commentary seeks to estimate aggregate CO2 emissions for portfolios reporting energy performance certificates in France and Germany, and discusses the credit relevance and the possible implications of the available information for the auto ABS market.

Summary highlights include:
-- In its current format, the information available to assess the energy efficiency or carbon footprint of a securitised portfolio in the auto ABS market is constrained.
-- The EPC data seem to present an indirect link between the energy efficiency of vehicles and credit performance, and vehicles classified in the more efficient energy performance classes seem to demonstrate better default or delinquency performance.
-- We consider the better default performance of loans for the purchase of alternative fuelled vehicles (AFVs) is more likely to be borrower driven and the "green" status of the vehicle does not appear to be a discriminating factor of better performance.

“It remains to be seen whether more data on AFVs would have positive or negative credit implications in the analysis of auto ABS securitisations”, said Guglielmo Panizza, Vice President of European ABS at DBRS Morningstar.