Supply Chain Challenges Abating – But Not Entirely; Still Affecting Automotive Aftermarket M&A Strategies

At the beginning of 2021, logistics costs and shipping rates were still high, and the ports were still clogged. High demand for products existed, while availability of goods remained low and lead times long. Global economies and travel have since opened back up. While shipping costs have come down, the risk of domestic rail strikes has lingered, with the U.S. government set to intervene.

While these external factors have improved, companies have continued to think hard about nearshoring some or all production given the speed-to-market advantages afforded by domestic or near-domestic production.

Vertical integration strategies are also being advanced through acquisitions and joint ventures. In October 2022, Contemporary Amperex Technology Co. Ltd. (CATL) announced it has agreed to buy an almost 25% stake in cobalt producer CMOC Group. CMOC mines metals in China and Africa, illustrating an upstream strategy to secure materials in the growing China EV supply chain. Furthermore, Ford Motor Co. and CATL are considering building a battery plant in Michigan or Virginia, which would be operated by CATL. The multibillion-dollar facility will make lithium iron phosphate batteries for Ford’s electric models.

Also in October, Nikola Corporation acquired Romeo Power, an energy technology leader delivering advanced electrification solutions. Commenting on the acquisition, Michael Lohscheller, Nikola’s President, said, “The acquisition of Romeo will enhance Nikola’s capabilities, allowing us to vertically integrate in an effort to accelerate product development and improve performance for our customers.”

Looking for a more in-depth analysis of key themes influencing the automotive aftermarket beyond the supply chain? We invite you to download our full 12-page report – The Deal Engine: AAPEX/SEMA Recap – M&A Themes Influencing the Automotive Aftermarket.

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Our Automotive & Aftermarket investment banking team has a deep understanding of the strategic, financial, and operational factors impacting middle market companies and a long track record of success in representing companies in M&A advisory.