Powerful factors including global vehicle production growth, and shifts in technology are driving the latest wave of mergers and acquisitions in the automotive industry.
Consolidation of service providers and automotive suppliers amounted to over $30 billion in deals last year, and the trend shows no signs of slowing. This blog explores three important implications of the consolidation of automotive suppliers.
Vehicle Production is an Expanding Industry
According to the Strategy & report on consolidation in the global automotive supply industry in 2016, “vehicle production is an expanding industry, with a global compound annual growth rate projected at 3.5 percent through 2022.” The consolidation of suppliers and service providers through mergers and acquisitions is a reflection of this growth trend, and indicate an expanding automotive supply industry.
Innovation is Driving Growth
The view of the automotive sector as a mature and cyclical industry without the opportunity for big returns is currently being challenged by a infusion of private equity interest in automotive suppliers. This interest, according to Ostermann and colleagues at PWC, reflects an attraction to technological change and the profit it can bring.
China’s Increasing Role Means US-Based Partners Are Even More Crucial
China is becoming a major player in the consolidation of automotive suppliers globally, and presenting and impetus for US-based service providers. From remanufacturing to logistics, United States service centers are crucial for maintaining brand integrity in the face of this rapid consolidation.