A frenzy of activity among Chinese new energy vehicle (NEV) manufacturers combined with a large restructuring deal in Japan to keep M&A activity in Asia Pacific's automotive sector at healthy levels.
The sector has hit its second-largest deal value in year-to-date (YTD) records, according to Dealogic data. The sector generated deal value of USD 31bn in APAC across 197 transactions in 2022 YTD. This is a decrease of 2.6% compared to the same period last year.
However, the slump was much less pronounced than in the Americas, where the sector plunged by 71.8% to USD 21.5bn. EMEA snatched the crown of the world’s largest M&A auto market despite a 42% drop to USD 30.6bn.
China accounted for eight out of the 10 largest auto deals in APAC. The most significant transactions took place in the field of NEVs, which include battery electric, plug-in hybrid and fuel cell vehicles as opposed to those running on fossil fuels. The largest deal in this segment was the proposed buyout of Aiways Automobile by China Liberal Education Holdings for USD 5bn.
Meanwhile in Japan, the USD 5.3bn restructuring deal of Marelli Corporation, an auto-parts supplier owned by KKR [NYSE:KKR], topped the Asian M&A deal chart in the automotive sector. Semiconductor shortage, supply disruptions and weak demand hit orders at car-parts makers such as Marelli, which also faced labor unions’ opposition to job cuts.
Middle Kingdom takes centre stage
China edged out the US to become the top M&A auto market in the world in terms of deal value with 97 transactions worth USD 21.5bn. It was the country’s third-largest deal value on Dealogic record despite a decrease of almost 7% compared to a year ago.
Other large NEV deals included the USD 2.53bn fundraising by GAC Aion New Energy Auto, a unit of Guangzhou Automobile Group [SHA:601238], in a Series A round; and the proposed acquisition of CH-Auto Technology Corporation for USD 1.7bn by US-listed special purpose acquisition company (SPAC) Mountain Crest Acquisition Corp. IV [NASDAQ:MCAF].
China, the largest car market in the world, has set a new record for new energy car sales in the past month: 675,000 NEV passenger cars were sold in September 2022, 43,000 more than the previous record month of August 2022. China is also the second-largest auto exporter in the world after Japan.
The government continues to boost the sector with a series of favorable policies and infrastructure investments. Guangdong, the Chinese province with the largest GDP and the widest electric vehicle (EV) charging network, has around three times as many public chargers as the whole of the US, according to Bloomberg.
Chinese consolidation
China will continue to offer plenty of dealmaking opportunities driven by consolidation among carmakers and fresh funding for start-ups developing new technologies for smart cars.
Among others, Dongfeng Motor Group [HKG:0489] is reportedly raising USD 703m in a funding round for Voyah Automobile Technology, its EV brand. Farizon Auto, a Chinese electric truck maker owned by Geely Holding, is also rumored to having approached investors in an effort to raise USD 300m.
In addition, German auto giants such as BMW [ETR:BMW] and Mercedes-Benz [ETR:MBG] are expected to continue to invest in China despite geopolitical tensions between Washington and Beijing.
Meanwhile in India, Tata Motors [BOM:500570] is also looking to raise funds for its new wholly owned mobility arm TML Smart City Mobility Solutions to fulfill orders for its electric buses.
With such a strong pipeline, the sector is likely to continue accelerating for the foreseeable future.
