"M&A Valuation Guide" 2: Transaction Valuations and Segmental Analysis of the Automotive Industry

Global Automotive Industry M&A Overview

Globally, the valuation of the automotive industry chain shows a "barbell-shaped" differentiation: on one end, there are high-premium M&As in the electric and intelligent sectors, while on the other end, traditional manufacturing assets are experiencing valuation discounts.  Particularly in the Chinese market, the valuation multiples in the new energy track continue to lead the global market.  How should we interpret these underlying data?  Below, we will explore the industry's trends, the logic behind the valuations, and the investment opportunities in the market.

Taking the EV/Revenue and EV/EBITDA multiples as examples:

• China Market: In the past two years, the EV/EBITDA median for new energy/power battery M&As, including Lobo EV and Ninebot, reached 16.3x, while the overall industry EV/EBITDA median was comparatively lower at 11.2x.

US Market: Over the past two years, the overall industry EV/EBITDA median stood at 9.2x, but for industry giants like Tesla in the electric vehicle sector, the EV/EBITDA multiple exceeded 50x.

Deep Dive into the Driving Factors:

• Policy Drivers: China's "Dual Credit" policy for automakers, which increasingly restricts the acquisition of new energy credits, and the EU's 2035 ban on internal combustion vehicles, are accelerating technological innovation.
• Technological Positioning: Breakthrough technologies such as the 800V high-voltage platform and solid-state batteries are generating valuation premiums.
• Ecosystem Restructuring: Cross-industry involvement of tech giants is giving rise to new valuation models for "new car-making forces."

The attached chart compares the global regional EV/Revenue and EV/EBITDA multiples.  It highlights that, in recent years, the price-to-earnings ratio in China's automotive industry M&A transactions has been higher than in the US and other regions.  This can be attributed to several combined factors:

1. Policy Factors: The Chinese government has implemented multiple policies to promote the development of the automotive industry, particularly new energy vehicles, such as subsidy policies, vehicle purchase discounts, and new energy vehicle industry development plans.  These policies provide a favorable development environment and opportunities for relevant companies.  Investors have high expectations for the future profitability of companies supported by these policies, which leads to higher price-to-earnings ratio valuations.
2. Industry Development Stage and Market Size: China's automotive market is vast, and the new energy vehicle sector is undergoing rapid development, with immense market potential.  Companies can quickly expand their scale, increase market share, and acquire new technologies or resources through mergers and acquisitions, thus achieving synergies and performance growth.  Investors, based on their optimistic expectations for the future development of the Chinese automotive industry, tend to assign higher price-to-earnings ratios to M&A transactions.
3. Capital Market Environment: The structure and investment style of investors in China's A-share market differ from those in the US and other regions.  In China, individual investors have a higher proportion, and their investment style tends to be more aggressive, with a strong focus on emerging industries and companies with growth potential.  These investors are willing to pay a higher price for M&A targets with growth potential, driving up the price-to-earnings ratios.  Additionally, the IPO valuations in China's A-share market have remained high for a long time, which also affects the valuations in the M&A market.

Segmental Analysis: Value Reconstruction Under Technological Revolution

1.     New Energy Vehicles (NEV) – Intensifying Valuation Disparities

o   Core Logic: The market is shifting from a "capacity race" to a "competition for technological supremacy".  Leading companies are using mergers and acquisitions (M&A) to acquire core technologies for the three-electric system (battery/motor/electronic control).

o   Valuation Characteristics:

• Global EV/EBITDA: The primary range falls between 3.2x and 13.8x (a 10-fold difference due to technological gaps).
• China Market: 8.0x - 25.5x.

2.     Traditional Vehicle Manufacturing – Revaluation Underway

o   Core Logic: Fuel vehicle assets are entering a "value discovery" phase, with M&A focusing on premium brand value and global production capacity integration.

o   Valuation Characteristics:

• Global EV/EBITDA: The primary range falls between 1.0x and 7.5x (high-end luxury brands maintain an 8x+ premium).

Overall, in the Chinese market, the valuation of new energy vehicles (NEVs) is driven by a "technology premium + policy premium" dual-factor model.  However, caution is advised regarding the risk of valuation corrections in areas facing potential overcapacity.  In contrast, in the European and American markets, traditional giants are adjusting the pace of their electrification transformations, maintaining a "dual-track" strategy of both fuel vehicles and electric vehicles.  They are enhancing competitiveness through partnerships, cost optimization, and other strategic moves.

If you would like to further explore the detailed valuation data for the automotive industry and formulate a precise investment strategy, we can provide comprehensive data support and in-depth analysis.
(The data and analysis in this article are for reference only.  Due to selective data screening and limitations in market and data collection, not all transaction scenarios are covered, and there may be incompleteness.  Please exercise caution when using this information for decision-making in critical processes.)

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