After a slow 2024, PwC expects uptick in auto M&A in 2025

The EV transition had a bit of a rough year in 2024.

Lower demand prompted many automakers to pull back on investments in electrification. The headwinds facing the sector also slowed M&A activity in the auto industry, as Tech Brew previously reported.

But things may be looking up on that front, according to PwC’s US deals outlook for 2025.

“As we head into 2025, there’s a lot of optimism about increased M&A activity,” Michelle Ritchie, US industrial products deals leader and global deals industrials and services co-leader at PwC, told Tech Brew.

The politics of it all: PwC noted that uncertainty around the election resulted in “an overall reduction in deal volume in North America and Europe” last year. Now that the US presidential election is behind us, business leaders have more certainty about where policy is headed, and may feel more comfortable moving ahead with deals.

The report also pointed to “positive macro trends such as interest rate and inflation reductions” as potential tailwinds in 2025.

PwC expects companies in the automotive industry to rework some of their supply-chain strategies in response to new import tariffs President-elect Donald Trump has said he intends to implement.

“This is likely to prompt more US M&A activity among companies looking to onshore their supply chains and increase their local production footprint,” per the report.

Hot streak: One of the biggest trends of 2024 was the popularity of gas-electric hybrids. Ritchie said she’ll be keeping a close eye on what happens with hybrids in 2025 to see whether they continue their hot streak.

Although hybrids might have stolen some of EVs’ thunder in 2024, PwC still has plenty of optimism around electrification, and expects more deals around “EV infrastructure and related support services” in 2025.

“Electrification is not going away,” Ritchie said. “But I think it pushes the timeline out, and more embeds the hybrids into the market.”

Supplier struggles: A third of automotive suppliers “showed signs of cash flow distress” in 2024, per the report, due in part to cost pressures associated with electrification. PwC expects further consolidation in this sector as suppliers face tough choices.

“Status quo isn’t going to work,” Ritchie said. “So it’s either get bigger, grow the scale, and make sure you’re embedded in electrification, given that’s where the market is going––or you get out.”