Rating agency Fitch downgraded Dongfeng Group (00489.HK)'s long-term foreign currency issuer default rating (IDR) and senior unsecured rating from "A" to "A-" with a negative outlook.

The downgrade reflects the deterioration of Dongfeng's independent credit status, which has been adjusted from "bbb+" to "bbb-". Given that China is accelerating its transition to new energy automobiles, this change reflects Dongfeng's weakened market position and profit-making ability.

Fitch expects Dongfeng's independent credit status to continue to be supported by a strong financial position, with ample net cash, healthy liquidity, and easy access to low-cost financing. However, Dongfeng's increasing investment in new energy automobiles, coupled with declining profitability, may result in a continued negative free cash flow, and a decrease in net cash levels in 2023.