Where Could Automotive M&A Be Headed in 2026?

Automotive leaders are operating in an environment defined by rapid change, where shifting demand, evolving technologies, and ongoing cost pressures are reshaping how companies think about growth and investment. In a recent Automotive News guest commentary, Alex DiBartolomeo, Managing Director at UHY, shares his perspective on where automotive M&A may be headed in 2026, noting how market volatility, supply chain challenges, and the transition toward electrification are influencing deal activity across the sector.

 

M&A trends in 2021-25 have been anything but normal: Post-pandemic highs and lows, shipping disruptions, supply chain volatility, labor shortages, rising input costs, monetary policy intervention, tariffs and a changing geopolitical landscape have all impacted whether deals are getting done or not across regions and capital sources.

The adage is “Deals get done in good markets, and deals get done in bad markets, but deals don’t often get done in uncertain markets.” In many ways, we’ve been in a perpetual state of uncertainty over this period, and thus global deal volume has remained below 2021 peaks with signs of improvement in late 2025. 

Deals valued at $1 billion-plus drove value in the automotive industry in 2025 and align with the broader M&A market trend over the last few years of “the haves and the have-nots."

The M&A trend over the last few years has been clear: A+ assets competitively traded at premiums, often with compressed diligence timelines and a steep drop-off in high-grade or “investable” assets either not trading or trading at discounted valuations.

As a bellwether for the broader economy, automotive M&A reflects the same volatility and uncertainty defining most sectors.

Automotive industry profitability

Automakers experienced higher profitability in the years following the pandemic, primarily because of supply-and-demand dynamics, followed by a steady decline through 2025 because of continued price pressure, higher costs, foreign competition and geopolitical instability. In some cases, suppliers have achieved better profitability than their automaker counterparts but face similar pricing, input costs and supply pressures, primarily because of geopolitical impacts on supply chains, tariffs and other factors.

Sustained profitability questions remain as buyers look to understand the source of profitability:

Dealership valuations are evolving fast as sophisticated buyers focus on future earnings and long-term potential. Here’s what’s driving the shift.

• Is it from overflow capacity moved to suppliers because EV capital investments took over plants?
• Is it from pure-play electric vehicle programs, or is it from single customers/programs/sectors?

Investment in new powertrains

One of the largest trends over the last five years has been the significant investment and subsequent write-downs of electrification capital. Major automakers have taken tens of billions in write-downs related to electric vehicle strategic investments.

At the beginning of the period, government support included:

• Executive orders to increase EV sales, striving for a 50 percent share of total vehicle sales by 2030 via the EV Acceleration Challenge. Factors included strict corporate average fuel economy standards aimed at mileage emission standards of 50.4 mpg by 2031.
• The Inflation Reduction Act, passed in 2022, offered consumers a $7,500 tax credit for purchasing electric vehicles with final assembly in North America.
• Increased tariffs on certain imported EVs, particularly from China

EV sales went from 488,000 in 2021 to 1.3 million in 2024, followed by a slight drop (2 percent) from 2024 to 2025. Recent policy shifts, decreased incentives and broader market implications contributed to softer EV demand, with early 2026 data indicating a significant year-over-year decline in sales.

Automakers and suppliers will be forced to review their product mix and assess whether they are exposed by a lack of diversification across powertrains and industries.

How can suppliers prepare for an M&A event in this market?

As mentioned, the M&A market has recently been characterized by a consistent haves and have-nots dynamic. The factors that drive premium valuations have not changed.

• Diversified customer and supplier base: Automotive suppliers should bereviewing their customer, vendor and product mix to ensure diversification not only within the automotive industry but across sectors. Consideration should be given to diversifying into sectors with similar needs, such as aerospace and defense,industrial, medical devices, energy and heavy machinery, among others. Companies looking to stay within automotive should monitor vehicle production program forecasts and ensure products and services stretch across combustion and EV powertrains.
• Consistent/predictable revenue stemming from commercial quality contracts: This sounds straightforward, but too often midsize to small companies (across all industries) do not forecast either because of a lack of internal resources, or because of informal contracts with customers (handshake deals). Ensure appropriate contract provisions are in place and tracked against current and future production levels.
• Organized and efficient operating structures and systems: Simply put, be investable. Have books, records, contracts, systems, etc., in order and fine-tuned. Above all: Know your cost. In an increasingly competitive pricing environment, efficiency will differentiate the winners from the losers. Expanded cost transparency and end-to-end value chain visibility mean that automakers are more likely to identify inefficiencies.

What to expect in the next M&A cycle