Oldie but not Goldie: Vehicle Manufacturer Analysis in European Auto ABS

This commentary provides insight into the vehicle manufacturer mix within auto asset-backed securities (ABS) portfolios in the European Union and the respective early-stage arrears performance following DBRS Morningstar’s review of loan- and lease-level data from the underlying exposure templates submitted to the European DataWarehouse.

Key summary highlights include:
(1) The early-stage arrears performance (i.e., 31-60 days delinquent) of “premium” brands is often higher than the market average.
(2) Performance varies depending on the originator's business model but, overall, captive lenders report lower early-stage arrears levels and the vehicle makes with the worst performance among noncaptive lenders are BMW and Mercedes-Benz.
(3) Despite the variances in performance by vehicle make and originator type, we believe the main factor driving early-stage arrears performance is the vehicle's age.
(4) The two leading battery electric vehicle (BEV)-only brands (Tesla and Polestar) represent only 0.2% of all nondefaulted contracts, but 0.3% of all accounts in early-stage arrears.
(5) Last year, there was a substantial growth in new BEV models; Volkswagen’s ID range leads the way and now represents 0.5% of all nondefaulted contracts.
(6) The early-stage arrears performance of the leading BEVs and other popular alternatively fuelled vehicles broadly reflects the overall trends for the associated manufacturer.

“There are substantial challenges in evaluating the credit performance of auto ABS transactions by vehicle make and model due to inconsistent reporting by originators. Further, the lack of information surrounding fuel types and CO2 emissions acts as barrier to transparency when evaluating environmental credentials for vehicles supporting receivables securitised in auto ABS transactions. However, this analysis demonstrates that there are clear trends among vehicle types but the most relevant vehicle factor is actually its age.”, said Alex Garrod, Senior Vice President, European ABS at DBRS Morningstar.