Fitch Ratings has upgraded the credit rating of Uzbek auto manufacturer UzAuto Motors from 'BB-' to 'BB', with a stable outlook, reflecting improved financial flexibility and strong state support.
The upgrade was driven by an improvement in the company's standalone credit profile from 'b-' to 'b', attributed to the successful refinancing of Eurobonds, increased liquidity reserves, and expected positive free cash flow between 2026 and 2029.
UzAuto Motors' rating also benefits from Fitch's assessment of an 'extremely high' probability of support from the Uzbek government, which indirectly owns the company. This aligns the automaker's rating with Uzbekistan's sovereign rating of 'BB'.
In November 2025, UzAuto Motors refinanced $300 million in Eurobonds due in May 2026 by issuing $350 million in new bonds maturing in November 2030. Proceeds were used to repay the previous Eurobonds and part of local bank loans.
As of end-2025, the company's cash holdings rose to $89.5 million from $42.8 million a year earlier. Additionally, it has access to $70 million via an export credit agency line and a syndicated loan.
Fitch expects positive free cash flow to support liquidity in 2026-2029, driven by reduced working capital needs, including the gradual repayment of auto loans previously extended to individuals.
However, the agency warned that changes in working capital could worsen cash flow and liquidity.
Over the past two years, UzAuto Motors' revenue and profitability have faced pressure due to weakening demand and tighter credit conditions in Uzbekistan.
In 2025, the company sold nearly 400,000 vehicles. The average selling price on the domestic market rose from $10,000 in July to $10,600.
Revenue reached $4.1 billion, and EBITDA (per Fitch methodology) hit $355 million, both exceeding Fitch's forecasts of $3.7 billion and $307 million, respectively.
However, free cash flow remained negative at minus $52 million, mainly due to increased receivables from individuals under auto loan programs.
Fitch expects cash flow to turn positive from 2026 onward as loan repayments increase and UzAuto Motors discontinues direct auto financing to consumers.
Under Fitch's baseline scenario, sales are projected to grow 1.3% to 400,000 units in 2026, with an average price of $10,800 in 2026-2028.
Revenue could rise to $4.4 billion in 2026 and gradually reach $4.7 billion by 2029. EBITDA margin is forecast at 8.6% in 2026, improving to 9.5% by 2029 on higher sales volumes.
Capital expenditures are expected to average 1.4% of revenue in 2026-2029. Dividend payouts are projected at 25% of profit in 2026-2027 and 30% in 2028-2029, with no M&A included in the forecast.
The state owns 99.7% of UzAuto Motors, but the company is considering listing up to 5% of its shares.
Fitch notes that the government maintains tight control, including approval of major investments and financing, and collaborates on pricing, especially for budget models.
Past state support, including tax breaks, shareholder loans, and import duties on competitors, is assessed as 'strong'.
UzAuto Motors is the only large domestic automaker, directly or indirectly employing over 30,000 people. Its sales and related lending are important for the banking system.
The company was the first Uzbek corporate issuer of Eurobonds, and Fitch warns that a default could harm the country's and other state firms' access to international capital markets.
However, its standalone credit profile is constrained by relatively small scale, concentration in the domestic market, narrow product range, and lack of a strong proprietary brand.
Production relies entirely on a long-term license agreement with General Motors, allowing use of the US automaker's technology.
A downgrade could occur if Uzbekistan's sovereign rating weakens, state ties loosen, support diminishes, debt/EBITDA exceeds 2.8x for an extended period, or free cash flow remains negative.
An upgrade would require an improved sovereign rating, a stronger standalone profile, debt/EBITDA consistently below 1.3x, and free cash flow margin above 2%.
Fitch expects UzAuto Motors to have about $33 million in freely available cash by end-2026, sufficient to cover working capital fluctuations.
The company's main debt instrument remains the Eurobond maturing in November 2030.
The entry of new players like BYD is boosting Uzbekistan's auto market, but competition is regulated to preserve UzAuto Motors' dominance, according to Moody's. The company remains tied to the domestic market with an aging model lineup.
In 2025, Uzbekistan produced 457,900 passenger cars, up 6.7% year-on-year. Despite overall growth, output of popular models like Cobalt, Damas, and Onix declined. Chevrolet's market share fell to 83.2%, while Chinese and other brands' production surged.
Source: www.gazeta.uz