Automotive supplier M&A update: H2-2017

Automotive supplier industry overview and indicators

Baker Tilly Capital, LLC’s automotive supplier M&A newsletter provides an overview of the North American automotive supplier sector, including recent performance and North American M&A trends.

Following seven years of growth, new light vehicle sales in the U.S. fell 1.8 percent to 17.2 million units in 2017. There is optimism that this decline will be stabilized in 2018 because of the sales momentum built toward the end of 2017 and the potential favorable impact the income tax cuts are expected to have on the economy. Pressure from the off-lease vehicles and the used vehicle market will remain, but is not expected to have a material effect on volume. The wildcard for the year is the future of the North American Free Trade Agreement (NAFTA) and potential impact from steel and aluminum tariffs.

JD Power and LMC Automotive forecast 2018 total light-vehicle sales to be 17.0 million units, a decrease of 1.3 percent from 2017. Retail light-vehicles are expected to reach 13.8 million units, a decline of 1.5 percent from 2017. The SUV segment is expected to grow another 3 percent in 2018 to a 45 percent market share while cars will remain under pressure with volume expected to drop 6 percent to a 33 percent share of market.

A significant trend in the M&A market is the continued acquisitions by technology companies of businesses in the auto-tech segment. This segment is defined as any company that produces products for autonomous vehicles, connectivity, electric vehicles and vehicle software. Intel’s $14.2 billion acquisition of Mobileye highlights this trend. Intel’s strategy is to combine the resources of both companies to create automated driving solutions from the cloud to the car. Intel estimates the vehicle systems, data and services market to be a $70 billion market by 2030.

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