KBRA Releases Research – European Auto ABS: Accelerating Towards Green

×

Error message

  • Notice: Undefined property: stdClass::$ds_changed in eval() (line 16 of /var/www/7/modules/php/php.module(80) : eval()'d code).
  • Notice: Undefined property: stdClass::$ss_search_api_url in eval() (line 20 of /var/www/7/modules/php/php.module(80) : eval()'d code).
  • Notice: Undefined property: stdClass::$tm_title in eval() (line 20 of /var/www/7/modules/php/php.module(80) : eval()'d code).

The market achieved its first green auto ABS deal in February 2023 with a transaction that exclusively contained hybrid- and electric-powered vehicle backed loans sold to investors.

Metadata
Provider: 
Business Wire, Inc.Business Wire, Inc.
Retrieved on: 
Wednesday, May 31, 2023
Information
Tags: 
Professional Services, Automotive, Insurance, Finance, Banking, Fleet Management, KBRA, BEV, Disclosure, ESG, ABS, OEM, Bev, CO2, Carbon
Geotags: 
UNITED KINGDOM, EUROPE, ITALY, UK
Organisation: 
KBRA
Summary
Key Points: 
  • The market achieved its first green auto ABS deal in February 2023 with a transaction that exclusively contained hybrid- and electric-powered vehicle backed loans sold to investors.
  • However, on further examination of recent European auto ABS transactions, there appears that a steady greening progression was already underway.
  • In this report, KBRA examines the increased use of alternative energy (which includes hybrid and BEVs) vehicles in securitisation transactions.
  • A green discount does not exist in European auto ABS as there currently appears to be no significant differentiation in pricing between those containing greener and those with fully traditional powered auto collateral.


KBRA UK (KBRA) releases a report on the European auto market as it continues to migrate towards removing carbon emissions from its entire vehicle fleet and how new hybrid powered and battery electric vehicles (BEV) have grown dramatically as a result. The market achieved its first green auto ABS deal in February 2023 with a transaction that exclusively contained hybrid- and electric-powered vehicle backed loans sold to investors. However, on further examination of recent European auto ABS transactions, there appears that a steady greening progression was already underway. In this report, KBRA examines the increased use of alternative energy (which includes hybrid and BEVs) vehicles in securitisation transactions.

Key Takeaways

  • Alternative energy vehicles accounted for more than 50% of new European vehicle registrations in Q4 2022, the first time they surpassed traditional petrol and diesel fuel types. BEV sales reached a record high in the UK, becoming the second most popular powertrain in 2022, surpassing diesel vehicles. This trend is largely attributed to stricter government tailpipe emission standards for new vehicles.
  • There is an increase in the amount of hybrid and battery electric vehicles that are included within securitisation collateral pools. Inclusion of these power types ranges from close to zero to over 40%, with the first fully hybrid European transaction issued in February 2023 with collateral from Italy.
  • A green discount does not exist in European auto ABS as there currently appears to be no significant differentiation in pricing between those containing greener and those with fully traditional powered auto collateral. Despite strong interest from ESG investors, it appears credit factors drove pricing, resulting in final credit spreads that were comparable to other transactions with lower BEV concentrations.
  • There is an uneven but increased level of disclosure on the breakdown of the collateral pool by fuel type and emissions levels of the underlying vehicles. KBRA has observed some recent transactions provide a detailed breakdown of the underlying vehicles by fuel type, CO2 consumption, and emissions group, but there are still several transactions without any disclosure.
  • Not all transactions are created equally. The proportion of auto leases and loans backed by hybrid and electric-powered vehicles in new securitisations are driven by many underlying characteristics of the portfolio. These can include (i) the split of new versus used vehicles in the portfolio, (ii) the vehicle type with many securitisations containing meaningful proportions of commercial vehicles, (iii) leisure vehicles alongside passenger vehicles, (iv) the original equipment manufacturer (OEM) alternate energy vehicle product offering, and (v) country of issuance.

Click here to view the report.

Related Publications

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

Copyright: 
Copyright Business Wire 2023