KUALA LUMPUR (Dec 31): Global auto industry conditions could potentially improve in 2022, with demand recovering further and supply chain challenges gradually easing.

In a visual presentation this month on its website, Fitch Ratings in its "2022 Global Auto Outlook" said worldwide sales are forecast to increase but likely to remain about 6% below pre-Covid-19 pandemic levels of 2019.

Fitch said semiconductor availability should modestly increase on a sequential basis through 2022, but supply chains remain vulnerable to the trajectory of the pandemic.

"We expect the supply-demand mismatch that led to very strong vehicle net pricing and mix benefits in 2021 will continue in 1H22 (the first half of 2022).

"However, recovering production and rebuilt inventories could lead to pricing, mix and margin normalisation in 2H22," it said.

Fitch said this could cause original equipment manufacturer's earnings and cash flow to come under pressure.

The rating agency said its 2022 sector outlook is "neutral".

"We expect ratings in Fitch's portfolio to remain unchanged.

On issues to watch for, Fitch said these include ongoing supply chain constraints and raw material price volatility, increasingly stringent climate-related emissions regulations, rapid electric vehicle growth, and potential normalisation of pricing and the product mix.