The advancement in autonomous, connected, electric and shared mobility (ACES) is expected to disrupt the conventional business model of the auto industry. Both non-automotive and automotive companies will employ the mergers and acquisition strategy to get access to the advancement in technology, intellectual property and other critical technologies to achieve sustainable business.
Companies such as Google, Uber, and Apple are capturing the software space in the automotive industry, so the automakers have the choice to transform themselves as the software provider to acquire the company which offers the allied solution for their products. This will further increase the competitive intensity in the industry and will disrupt the market. Furthermore, companies in the consumer electronics domain are making an acquisition of auto tech companies to enter the sector. Samsung has acquired Harman to address the requirement of autonomous vehicles.
Auto companies have witnessed the growing interest of technology companies in the automotive domain. So to provide the competition to these companies, automakers are getting involved in bringing the technology in-house, which will further help them to reduce the production and procurement cost. The profit potential and the growth opportunities are getting clear for the ACES, the industry will witness more partnerships, M&A’s and investments from automakers to advance their position in the mobility landscape.
In the shared mobility space, the joint venture between BMW and Daimler will change the complete on-demand mobility space. The other OEM’s will also experiment with the same strategy in the future. Renault-Nissan and Mitsubishi are trying to merge to offer a solution under one common brand name. Shared mobility is the new space for investment and will witness heavy traction because of its potential to change the mobility industry.
The shared mobility is growing at a very fast pace at the global level. This has led to more innovative startups in this space to address the growing demand in the shared mobility business. Shared mobility helps to tackle issues in the cities such as pollution, congestion, and at the same time provide a convenient and economical method to travel. It is been realized by the automakers that shared mobility is the future and will also play a key role in bringing the revolution in the industry. M&A and investment have played a crucial role in expanding the industry and now the industry focuses more on offering innovative services with new business models.
The most attractive market to acquire the startup is Israel. The country will keep on attracting auto giants in the future because of more than 600 auto tech startup present in the country. In the last five years, the country has witnessed the acquisition of more than 105 startups. The country major startups are focusing on communication, analytics, Big Data, and artificial intelligence. To stay ahead of the competition, technology giants and automakers will acquire the smaller companies to receive an advantage in terms of competition. The aim is to address the present skill gap and enhancement of the current product portfolio with respect to R&D. The joint venture will help the automakers to strengthen their presence in the market, get a greater share in the market and increase the profit margin.
OEM’s desire to acquire advanced technology, services, and new business models will boost M&A activity in the automotive sector, with more high-value deals. Emerging technologies in electric, connected, autonomous cars and shared mobility will drive M&A in the coming years. OEM’s desire to acquire technology will result in a higher valuation of tech startups and increase the number of higher value deals. More than 60% of the M&A deals in the past three years have been related to electrification and autonomous technology, with bigger players turning to startups for their innovation. For EV specifically, acquiring or partnering with charging infrastructure companies is a faster way to expand geographically.
Opportunities exist for both automotive and tech companies to acquire innovation, critical talent and intellectual property from auto tech startups and bring these innovations in-house for profitability. Venture capitals can invest in acquiring disrupters for higher returns. The corporate venture capitals will provide their parent companies an opportunity to identify, invest in and finally acquire companies in line with their business to remain competitive in the new mobility era.