1. Use M&A to manage tariff exposure: Pursue acquisitions that reduce tariff burdens and secure critical components at predictable costs.
2. Target smaller suppliers strategically: Smaller Tier 2 and Tier 3 players are acquisition opportunities for companies seeking vertical integration and supply chain control.
3. Balance portfolio pruning with technology investment: Divest underperforming assets and invest in technology and software-defined vehicle capabilities to define the competitive position.

Respondents to our survey identified the need to increase supply chain resilience (55%) and tariff-driven supply chain restructuring (53%) as the two biggest expected drivers of automotive M&A activity in 2026. Dealmakers in the automotive industry could be changing their priorities from acquisitions to support the shift toward hybrid vehicles and supply chain optimization. 

Divestiture of underperforming assets (38%) also emerged as a significant driver of automotive M&A activity, up from 18% last year, a 20 percentage point increase. This reflects margin pressure from tariffs, inflation, and uneven EV demand, pushing companies to sell weaker assets to fund investments in areas that will determine long-term competitive position.

The shift from electric vehicles towards hybrids as a driver of M&A activity dropped 18 percentage points from 47% last year to 29%. This substantial drop suggests either that the hybrid transition has matured or that companies have already made their strategic moves in this space, with M&A activity now focusing on other priorities.

Technology acquisitions for software-defined vehicle capabilities (24%) indicate steady interest in acquiring technology assets, though this is not expected to drive dealmaking at the same intensity as supply chain restructuring.

Semiconductor and critical materials shortages (19%) are lower than in 2024, suggesting that these bottlenecks may have been previously addressed through acquisitions or long-term contracts and joint ventures.

Supply chain concerns dominate M&A drivers, with the need to increase supply chain resiliency and tariff-driven supply chain restructuring topping our list for dealmaking factors in 2026. Together, these represent a unified strategic imperative where companies are using acquisitions to simultaneously build resilience and manage tariff exposure, recognizing that the two objectives are inseparable.

The pattern is particularly visible in Tier 2 and Tier 3 supplier consolidation. Smaller suppliers operating on thin margins may struggle to absorb tariff shocks and lack the financial resources to relocate production themselves. Well-capitalized acquirers, including both established Tier 1 suppliers and private equity firms with automotive portfolios, may target these companies to build more resilient supply networks.

The combined response rate for the two supply chain categories confirms that supply chain M&A is not a narrow strategy pursued by a subset of companies but rather the dominant dealmaking theme across the industry. Geography is critical, and the primary strategic question is not whether to grow through M&A, but where to acquire to build resilient, tariff-optimized supply chains.