Automotive companies struggling with weak demand, higher costs
Car sector a mainstay of economic growth, jobs in central Europe
Region39;s lenders can withstand stress to automotive portfolios
Chinese banks monitoring investments and opportunities in CEE

BUDAPEST, Jan 14 Reuters Turmoil in Europe39;s car sector could hit the central European economy and hurt banks39; asset quality, SP Global said on Tuesday, although it added that lenders were strong enough to withstand stress in their automotive portfolios.

Automakers across Europe have announced plant closures and big layoffs as they struggle with weak demand, high costs, competition from China and a slowerthanexpected transition to electric vehicles.

The sector is a mainstay of central Europe39;s economic growth, accounting for 5 to 10 of the region39;s gross domestic product and 5 of its employment, according to SP.

While direct credit exposure of CEE banks to the automotive sector is relatively low, at about 35 of total corporate loans, a significant downturn could impair the region39;s economy and banks39; asset quality, it said.

Although major carmakers have diversified their funding away from bank loans to capital markets, SP said shocks in the industry could still lead to significant knockon effects.

The threat of U.S. tariffs on European car imports, tighter emissions regulations in the European Union from 2025 and intense competition from Chinese electric carmakers could pose additional challenges,…