M&A in the German Automotive Industry: New Momentum Expected in the Second Half of 2025
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M&A in the German Automotive Industry: New Momentum Expected in the Second Half of 2025
In Germany’s automotive industry, the M&A market is shaped by technological change and geopolitics. Sebastian Kainz and Nicholas Hanser expect a new momentum in the second half of 2025.
A Historic Turning Point
The German automotive industry stands at a historic turning point. Driven by profound technological disruptions, significantly changed consumer behavior—especially among younger customers—regulatory changes, and intensified international competition, there is a growing openness to mergers and acquisitions (M&A). At the same time, geopolitical tensions are increasingly acting as a strategic metronome, influencing the direction, speed, and depth of this transformation.
Pursuit of Future Viability
Whether through strategic acquisitions, spin-offs, or international joint ventures, companies in the automotive industry are increasingly relying on transactions to secure essential competencies in electromobility, software integration, and sustainability. Medium-sized suppliers in particular, facing growing pressure on margins and innovation, are actively seeking partnerships and investors to maintain their long-term competitiveness. The shift to electromobility serves as a dual momentum: on one hand, it fuels M&A activity as new technologies and market segments must be developed. On the other hand, it demands massive investments from manufacturers and suppliers—such as in new production technologies, battery development, or digital services. These financial burdens act as a catalyst for industry consolidation: only those who scale effectively and operate efficiently can remain competitive. Tech-driven start-ups are also under pressure. The capital needs of many e-mobility newcomers were systematically underestimated in the past—resulting in operational losses and liquidity shortfalls. Recent bankruptcies of prominent players like Nikola or Fisker demonstrate that not every vision can be realized in capital markets. Social and ecological risks—such as those surrounding lithium mining for battery cells—also raise critical questions that investors will need to consider more strongly going forward. Sustainability is becoming an integral part of every due diligence.
New Momentum in the Second Half of the Year
Despite these uncertainties, capital remains available: private equity funds are sitting on billions in so-called "dry powder," waiting for lucrative investment opportunities. Strategic buyers—such as those from the transport and logistics sectors—are also actively scouting the market to future-proof their portfolios. Much suggests that M&A dynamics will further accelerate in the second half of 2025: a potential economic recovery, combined with technological breakthroughs and regulatory planning certainty, could enable new transactions—especially in growth areas such as autonomous driving, connected mobility, and sustainable supply chains. At the heart of all these activities remains the goal of securing access to key technologies through acquisitions and maintaining strategic maneuverability in global competition. The M&A market is thus evolving from a tool of reorganization into a driver of innovation—and is becoming a central force in industrial transformation within the automotive sector.
Geopolitics as a New Pacemaker
In the past, M&A was primarily considered from an economic perspective. Today it’s clear: the political context strongly influences whether, where, and how transactions can take place. Three developments stand out in particular:
International tensions and trade conflicts: The escalation of economic rivalries—such as those between the USA, China, and Europe—has direct consequences for export-oriented industries like Germany’s automotive sector. Tariffs on electric vehicles or individual components, export restrictions on semiconductor technologies, or subsidy races for battery factories can quickly change the playing field. M&A is becoming a reaction to geopolitically induced market shifts, such as accessing new sales markets or reducing dependencies.
Disruptions to global supply chains: The pandemic, the war in Ukraine, attacks on oil infrastructure in the Middle East, and tensions around Taiwan have shown how vulnerable global supply networks are. Companies are increasingly adopting "de-risking" strategies: beyond traditional nearshoring and friend-shoring, targeted insourcing of key technologies through acquisitions is gaining importance. Notable examples include M&A activities in power electronics, semiconductors, or battery chemistry.
International subsidy policies: Massive foreign subsidies for future technologies are forcing German OEMs and suppliers to consider international joint ventures or acquisitions—not just to gain access to technologies, but also to benefit from local financial incentives. In the U.S., for example, production incentives under the Inflation Reduction Act are creating new site selection logic. Anyone wishing to remain competitive globally must also be regulatory agile—and M&A is a key lever here.
Between Opportunity, Risk, and Integration Pressure
Undoubtedly, a well-planned M&A strategy can help transform the pressure to change into opportunities. However, reality is more complex: integration often fails not because of technology or product logic, but due to cultural differences, lack of change management, or rushed deal-making. Especially in cross-border transactions, the post-merger phase becomes the decisive success factor. Added to this is uncertainty about macroeconomic trends: inflation, volatile energy prices, and the shortage of skilled labor complicate reliable deal evaluations.
Another area of tension arises from ESG requirements: investors and stakeholders are increasingly demanding transparency and sustainability—including in the context of M&A. Acquirers must demonstrate not only financial but also ethical and ecological credibility. For many medium-sized suppliers, who are simultaneously burdened by high financing costs and declining margins, this can become a stress test—or an opportunity to position themselves as attractive acquisition targets.
The M&A Entrepreneurs
