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Automotive: Deals 2022 outlook

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What's driving deals in 2022

PwC's Deals Sector Leader John Potter and other partners discuss the deals outlook for 2022.

Automotive new-energy electric technologies look to charge 2022 deals

The automotive market in 2021 has continued to track on its 2020 path of new-energy vehicle (NEV) M&A primarily fueled by special purpose acquisition company (SPAC) transactions. Of the top 10 global M&A deals announced, six were SPAC deals ranging from electric vehicle (EV) manufacturers (design and testing phase) to EV charging solutions. Meanwhile, macroeconomic headwinds have plagued the industry in 2021 with increasing commodity costs and a perfect storm of semiconductor supply-chain interruptions causing production shortages that could cost the overall global industry more than $100 billion.

Global M&A hit historical highs in 2021 with a total deal value of $136.6 billion — up 111% over 2020. While the onset of the pandemic significantly impacted deal value and volume in 2020, M&A activity recovered and accelerated with deal volume in 2021 up 19% to 971 deals with an average disclosed deal size of approximately $435 million.

Of the $136.6 billion of deal value, vehicle manufacturers comprised the largest segment with $61.3 billion (or 45%), primarily due to SPAC deals and other investments in NEV. Despite disruptions and challenges stemming from the COVID-19 pandemic, investments in NEV were a central theme in 2021 across all segments. We expect these trends to drive further M&A activity in 2022  from manufacturers (including last-mile commercial vehicles) to battery producers and other players in the EV ecosystem.

Automotive deals outlook

M&A recovered in 2021 and exceeded expectations as investments in new technology accelerated. We expect deal activity in 2022 to continue to expand as we experience greater access to emerging sources of capital (notably SPACs), investment in NEV and technology across all automotive subsectors. Traditional trends in supplier and retail consolidation will likely continue, yet likely with a focus on investments in technologies centering on the future of driving and new ways of engaging with customers whose buying habits have changed from traditional sources.

We also expect M&A to be both a catalyst and opportunity for organizations to right-size operations to meet new market demands and strengthen supply chains in a post-pandemic world. We’re already seeing some vehicle manufacturers enter partnerships to combat shortages of key production inputs — mainly semiconductors — and expect others to follow suit as these challenges persist well into 2022. While we remain bullish, investors will need to be cognizant of navigating ever complicated geo-political uncertainties and regulators that are beginning to focus on net-zero emission policies.

Key deal drivers

Committing capital to growth

SPAC deals continue to surge in the latter half of 2021. Six of the top 10 deals were SPAC-backed acquisitions of development stage EV manufacturers, EV battery technologies and autonomous technology including $20 billion for Polestar Performance, $11.8 billion for Lucid Motors and $11 billion for Aurora Innovation Inc. Companies are increasingly looking to invest or co-invest in startups developing new technologies for batteries and autonomous driving. We expect this trend to continue into 2022, as companies strive for market adoption of solutions and to make strategic moves to position their technology for success. 

Unlocking value in a high-multiple, high-expectations environment

The pandemic altered the way we live, work and move through our world. It also prompted automotive companies to rethink how they serve their customers. We have seen a shift in consumer preference from public transportation to private vehicles due to social-distancing measures — including a downtrend in ride-sharing. This shift has powered a new wave of car buyers that will likely swell into 2022. Further, as e-commerce continues to be consumers’ preferred shopping medium during the pandemic  despite US retail markets opening up for in-person shopping — we have seen investments by dealers in online sales platforms, as well as investment in contactless payment solutions and electric last-mile delivery vehicles to further facilitate sales and support our new ways of living.

ESG: front and center

Developing a roadmap leading to climate-neutral mobility and corporate responsibility will likely continue to be central to C-suite discussions, strategy development and corporate governance. Indeed, many automakers are already setting various environmental, social and governance (ESG) goals and targets. While ESG initiatives may not directly or conspicuously fuel M&A, they nevertheless can have an indirect impact on automotive M&A as industry leaders become more vocal on ESG practices and values they expect of themselves and future partners.

Increasing resilience and security

The global semiconductor shortage impacted automotive production, leaving suppliers scrambling to meet high demand despite all-time low inventory levels. It's also a warning signal to manufacturers that they may be vulnerable to other supply-chain disruptions that could sideline plans or derail economic recovery. The upcoming year will likely be pivotal in the automotive sector as organizations may seek M&A opportunities to avert supply-chain constraints by enhancing access to inventory either through untapped geographies or penetrating new supply-chain networks.

“New ways of living, new technologies, and new capital are injecting new life into automotive M&A activity. We expect these trends to continue in 2022 as automakers cement their EV plays and as SPAC dry powder chases growth in auto-tech assets.”

— Paul Elie, US Automotive Deals Leader

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Paul Elie

Paul Elie

Industrial Manufacturing Deals Leader, PwC US

Michelle Ritchie

Michelle Ritchie

Industrial Products Deals Leader, PwC US

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