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The EV market’s recent woes are partly to blame for a slowdown in M&A activity in the automotive industry so far this year—but things may be looking up soon.
That’s according to PwC’s midyear analysis of auto deals.
“In 2024, the auto sector’s M&A activity is slowing due to factors like reduced consumer demand for electric vehicles and higher interest rates,” the report concludes. “This makes it crucial for companies and private equity firms to focus on M&A strategy to redefine their business objectives and bring value to stakeholders.”
Late last year, it started to become clear that automakers in the US had overestimated the demand for EVs, at least in the near term. Consumers, held back by concerns about charging, battery range, affordability, and other factors, pumped the brakes, prompting EV investment delays.
PwC expects things to pick back up next year: “Moving into 2025, we can expect deal activity to be driven by continued investment in electric vehicle assets, infrastructure, and the consolidation of internal combustion engine technologies.”
But first, we’ve gotta get through a slew of key elections happening around the world this fall, including the presidential election in the US.
Michelle Ritchie, global industrial manufacturing and automotive deals leader at PwC, told Tech Brew that elections tend to bring M&A activity to a halt as business leaders await policy changes.
“It is going to be a choppy few months as we get through the elections and the next few months,” she said, “but after that we expect the M&A activity and market to really take off. It’s key for companies to be prepared to reap those rewards.”
She expects some of that activity to be driven by investments in EV-related tech. But PwC also anticipates M&A activity to tick up in the ICE vehicle segment, where companies might look to consolidate amid an uptick in demand.
“This activity could drive an uptick in M&A volume in the US heading into FY25—either through full-scale acquisitions or the formation of strategic alliances and joint ventures to share the associated costs,” the report said.
While automotive M&A deals slowed, those that did come together so far this year largely were driven by tech advancements—notably in “EV technologies and EV battery manufacturing, internet-connected cars and safety systems, and app-based technologies for EVs and ridesharing,” per the report, and seven of the 20 biggest deals were tied to EV battery manufacturing or “infrastructure build-out.”
Despite the recent headwinds, PwC remains bullish on electrification overall—in no small part because of regulations and policy that are pushing the auto industry to decarbonize.
“This will require auto players to re-evaluate their standing in the industry,” the report said, “and consider where acquisitions or divestitures will strengthen their position or help shift their focus to key elements of their business.”