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Automotive: US Deals 2023 midyear outlook
Auto M&A cools — yet showing healthy activity
Global automotive M&A improved in total deal value by $40 billion for the 2023 YTD period compared to the same year-ago period. However, $23 billion of total deal value was comprised of the Vinfast megadeal (Vinfast is a Vietnam-based electric vehicle original equipment manufacturer with plans to roll out vehicles to the U.S late fall 2023). Excluding the megadeal in the first half of 2023, total deal value was $17 billion, suggesting a slowdown of core non-megadeal M&A activity. Despite the increase in total deal value, deal volume declined 25% to about 350 deals for YTD 2023.
The sector’s need for technological and electrification development will likely continue to keep automotive companies’ strategy focused on M&A. However, we expect the YTD 2023 trend to continue in the second half of 2023 given the macroeconomic challenges the industry continues to face with inflation, increased interest rates and capital pressures.
Similar to 2022, dealmakers have demonstrated discipline in their capital distribution in the first half of 2023. Inflation, high interest rates and other macroeconomic factors exerted added pressure on dealmakers to make strategic decisions, given that there was less margin for error. At the same time, however, certain core commodities and logistical costs tempered in 2023 from severe levels in late 2021 through 2022, helping to reduce margin volatility.
We continue to expect a conservative approach in the automotive market in the second half of 2023. Deal volumes will likely remain stable, as the automotive industry generally continues to trend toward pre-pandemic performance levels and as automotive companies continuously prepare for an electric future on numerous fronts, including investing in electric vehicles and CASE (connected automated shared electric) assets, minimizing supply chain disruptions and consolidating their scale through M&A.
Automotive deals outlook
Companies face markets being reshaped by technology and disrupted by geopolitical unrest, a global pandemic and economic shocks. As a result, CEOs are turning to transformative acquisitions to reposition and reinvent their businesses for long-term success. Companies are also beginning to crack the code on how to make big, transformative deals successful: leveraging experience, early and sustained investment in integration, and a commitment to creating and implementing new long-term operating models.
Looking ahead into the remainder of 2023, we expect continued opportunities for auto companies to make strategic investments, particularly in CASE technologies.
Learn more about leading practices and transformational mindsets in PwC’s new M&A integration report.
“Even as the automotive sector experienced tempered deal activity in the first half of 2023 (coming off a relatively stable 2022), the surge and rise in BEVs cannot be ignored. Businesses need to make critical decisions on how to innovate and grow their organization to meet demands of the future. Dealmaking will continue to play into those decisions — and the form of new deals will continue to evolve.”
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