In its recently released U.S. Deals 2026 midyear outlook report, PwC (PricewaterhouseCoopers) said automotive M&A (merger and acquisition) deal value fell 60% year-over-year in Q1 2026, reflecting a more selective and cautious deal environment. It also noted a shift in capital prioritization mirroring general industry trends and consumer demand.

According to PwC, buyers have been trying to navigate a dynamic landscape of stagnant volumes, tariff escalation, regulatory uncertainty, uneven EV adoption, and tighter financing conditions. The resulting impact from macro events has led to key trends for automotive in less frequent large-scale transactions, divestitures of non-core assets to support liquidity, and targeted capabilities where buyers can better manage integration risks.

Strategic buyers, such as original equipment manufacturers (OEMs), continue to dominate the M&A landscape. However, private equity (PE) has regained ground.

“Automotive M&A will stabilize as some of the volatility in macro trends stabilize, but we think PE will continue to increase their share of the deal market as assets become more affordable and strategic buyers remain capital constrained,” said Michael Fiore, U.S. Industrial Products Deals Leader, PwC.

The largest auto deal so far this year was PE-led. In April, Apollo Global Management completed a $1.6 billion carve-out acquisition of Forvia’s Interiors Business Group, which did not attract a competing strategic bid at the clearing price.

This marked a notable reversal after years of strategic-led dominance. PwC said 2026 deal value is annualizing at approximately $19 billion, the lowest level in the firm’s time series, which began in 2019.

Excluding the Apollo Global-Forvia interiors deal, the pace for the first half of 2026 will drop further to roughly $13 billion annualized, suggesting the PE re-emergence is supporting the headline rather than layering on top of a steady strategic baseline.

In general, OEMs and Tier One suppliers are realigning footprints to reduce geopolitical risk and hedge EV uncertainty, while aftermarket resilience and dealership consolidation continue to attract capital. In this environment, automotive corporates and sponsors are balancing exposure across multiple powertrain paths (internal combustion engines, hybrids, and electric vehicles) while prioritizing assets with proven earnings durability overgrowth narratives. Supplier portfolio reshaping remains a central theme across the automotive sector.

In addition, OEMs and suppliers are shifting capital toward technologies that support SDVs (software-defined vehicles) and ADAS (advanced driver assistance systems), while increasingly looking to use joint ventures and strategic partnerships to gain exposure to EV (electric vehicle) technologies, battery supply chains, and next-generation vehicle software opportunities. This year’s deals suggest a shift from the prior EV transformation narrative, mirroring a general decrease in EV demand, with activity moving towards traditional components, aftermarket distribution, and dealership consolidation.

Strategic buyers have pulled back compared to previous quarters but continue to drive about 87% of deal value and volume. Transactions have been increasingly concentrated into smaller, capability-driven targets where integration risk and capital exposure are more manageable. Buyers seek to create value through scale, procurement leverage, manufacturing efficiency, and broader customer access amid OEM production volatility, labor inflation, and margin pressure.

Unsurprisingly, tariff escalation and evolving local requirements have accelerated supply chain regionalization and manufacturing localization strategies across North America, particularly among OEMs and Tier One suppliers seeking to reduce geopolitical and supply chain risk.

In Europe, suppliers are moving from financial distress into outright sales processes. Several processes have launched in 2026, with more queued, creating an unusual buyer’s window for U.S. strategics and sponsors with strong balance sheets heading into the second half of the year.

Large-scale transactions have slowed meaningfully in the first half of 2026, but despite weaker megadeal activity, targeted acquisitions tied to software, electronics, automation, aftermarket resilience, dealership consolidation, and supply chain capabilities continue to attract interest, according to PwC.

In terms of future guidance, the report noted two factors that will shape the outlook for the rest of 2026.

The first is trade and tariff policy resolution. Tariff escalation has constrained cross-border transactions and clouded valuation models. Policy clarity, or further escalation, will directly influence deal volume in the second half of the year.

The second factor is technology and portfolio realignment/funding. SDVs, AI (artificial intelligence), and connected ecosystems remain strategic must-haves, but buyer caution favors bolt-ons over platform bets.

Expect continued carve-outs from suppliers dealing mostly in ICE (internal combustion engine) technologies, as well as steady aftermarket consolidation, as investors prioritize cash flow and resilience and sellers try to shore up capital for investment.