After years of cost-cutting measures, automakers are slowly coming out of recession with strong financial performances, and now spending their reserves on M&A to achieve higher growth levels and to meet rising demand. In the first eight months of 2016, the automotive sector in both the US and Canada experienced extraordinary level of M&A activity.
Meanwhile, Chrysler (NYSE: FCAU) is investing US$280 million in a manufacturing joint venture with India’s Tata Motors (NYSE: TTM) to operate an assembly plant in Ranjangaon, India. The production of a new Jeep vehicle is expected to begin in the second quarter of 2017. India, an essential part of Jeep’s global expansion plans, is expected to become the world’s third-largest auto market behind China and the US by 2020, with SUVs making up about one-fifth of India’s 2.6 million annual passenger vehicle sales.
Currently, not only is conventional auto M&A activity active, the sector’s self-driving revolution has also driven auto supplier deals during the year. The driving force behind the huge number of consolidation deals is the pressure to keep up to date with the move towards autonomous driving.
GM in May bought Cruise Automation, a San Francisco-based tech startup of autonomous vehicle technology. The deal is valued at more than US$1 billion and was in line with GM’s move to produce a team dedicated to the development of self-driving car technology in the company. The deal is also a building block in the company’s approach to better compete with competitors that are working further into the technology.
For instance, Alphabet Inc’s (NASDAQ: GOOGL) Google car program and Ford are in talks about forming a partnership to develop autonomous car technology. The venture includes top automakers such as BMW (BIT: BMW) and Volvo (STO: VOLV-A).
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