Is M&A necessary to share the burden of electrification?

By 2027, 15% of electric vehicle (EV) companies founded in the preceding decade may have been acquired or bankrupted, according to a March 2024 report from Gartner. Although the analyst concluded that a ‘survival of the fittest’ mentality would replace the prior ‘gold rush’, this does not necessarily imply disaster for the EV segment. Rather, it is simply a new phase of consolidation.

The automotive industry is no stranger to M&A activity: many of the largest OEMs—such as GM and Stellantis—are conglomerations of previously independent brands. Markets like China are weighing the merits of combining its EV manufacturing advantages with government support to create unique restructuring results that address the sector’s economic difficulties. Far from being a regional consideration, these challenges are truly global.

As newer manufacturers like Fisker and Lucid Motors struggle to build and sell vehicles at a time of high interest rates, forever relying on the “bottomless wealth” of investors—in the words of Lucid’s Chief Executive Peter Rawlinson—is becoming untenable. In this atmosphere, M&A activity from larger players becomes a viable route for keeping innovative technology in circulation while saving the costs needed to weather the storm.