Epidemic prevention and response to COVID-19 in the automobile industry series Issue 2 - PwC China automobile industry M&A review and outlook

March 2020

With emergence of new business models, relaxation of industry policies, and change in consumer demands, M&A activity in China automobile market is expected to grow in the next 2-3 years. Most deals will likely be cross-region, cross-industry, and cross-function. Foreign companies will focus on optimizing strategic planning in Asia-Pacific region, especially in China, whilst local enterprises continue to accelerate globalization and seek more overseas M&A opportunities. Moreover, an increasing number of companies with advanced technology and capital will continue entering into the market which fuels more M&A activities in the automobile industry.

In this article, we will analyse it from the following four aspects of the review of China’s Auto Industry M&A Deals, the main driving factors and changes, the prospect of future M&A trends, and the key initiatives in response to market changes.

Part I. Review of China’s Auto Industry M&A Deals

Part II. Main Deal Drivers and Changes of Auto Industry Based on current events and on-going industry reform, we will review the impact of the new coronavirus epidemic, scrapping JV ownership limits and “CASE” trend on the M&A deals of China’s auto industry.

  • The new coronavirus epidemic accelerated the auto industry transformation
  • Scrapping of foreign ownership limits has greatly promoted the development of JV M&A activities and will further accelerate the transformation
  • The “CASE” trend will further promotes cross-border, cross-industry and cross-functional M&A, and drive the transformation towards smart mobility

Part III. The future M&A trends in China's automobile industry

  • Cross-border: Global Strategic Alliances and cross shareholding are emerging, expanding scale effect, improving efficiency, reducing cost and accelerating innovation and transformation
  • Cross-industry: cross industry investment and cooperation, share technology and resources, and accelerate the strategic development of new “CASE” trend and smart mobility
  • Cross-function: business expansion between upstream and downstream enterprises, accelerating investment in future hot sectors, and improving the core value of enterprises
  • Cash flow is king: accelerate business spin off and restructuring, strengthen cash flow management, face industry challenges and stable enterprise value

Part IV. Key initiatives in response to market changes

  • Strengthen investment and financing capacity
  • Strengthen post deals management capability
  • Dispose of distressed assets, and improve ability to optimize capital structure and restructure
  • Oversea operation capability

 

Contact us

Jun Jin

China Consulting, M&A Consulting Leader

Tel: +[86] (10) 6533 2977

Rick van Dommelen

Partner

Tel: +[852] 2289 1823

George Lu

Partner

Tel: +86 (10) 6533 2920

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