Lincoln International's experts share four of the business strategies reshaping the auto industry.

In 2017, the largest OEM in the United States, General Motors, withdrew from Europe with the sale of Opel and Vauxhall to Groupe PSA. Rival Ford recently announced that they will retire their last mid-sized sedan in Europe, Mondeo, in 2022, raising further questions about the company’s intentions in Europe long-term. This news comes only two months after Ford announced their exit from Brazil after more than 100 years in the country.

GM and Ford are pulling back from their global operations largely because these operations are struggling. With emphasis on electrification and technologies for autonomous driving soaking up huge amounts of capital, OEMs are employing discipline to their global footprints, pulling back from loss-making regions and redirecting that capital. One exception to the rule? Tesla has invested in a German Gigafactory scheduled to open this year.

With just under 15 months of construction, EV leader Tesla opened Gigafactory 3 in Shanghai, a plant that could ultimately manufacture as many as 1 million EVs a year. With a growing middle class in China and strong emphasis on electrification premiumization of Western brands, Tesla has capitalized on the growth opportunity in the Chinese market, deftly winning the support of the Chinese government and evading the need for a local partner. Despite a few years of slowed growth, China remains a strong auto market. Even the nation’s 6.8% decline in car sales can be viewed as a win in the context of the pandemic—and in relation to other countries. The China Association of Automobile Manufacturers expects China to see 4% growth to 26 million new vehicle sales in 2021.

From a blockage in the Suez Canal to a global semiconductor shortage bringing production to a standstill, the global trade infrastructure has become increasingly challenging. Cost of and delays in shipping have heightened concerns. U.S.-China trade tensions escalated in 2018 when the U.S. enforced a 25% tariff on steel and a 10% tariff on aluminum imports from China. This rise in nationalism and global tariffs has further accelerated a trend toward securing a localized supply chain.

2021 saw the creation of Stellantis, a global behemoth bringing together Italian-American Fiat Chrysler Automobiles and French Groupe PSA. The company takes the position as the fourth largest automaker globally. CEO Carlos Tavares paints the new alliance as a path to “open new opportunities for a company that… [does] not want to be cornered in a legacy or a dinosaur position.” With the pooled revenue of FCA and PSA, Stellantis can funnel earnings into EV investments—potentially moving from a laggard to leader position. The carmaker aims to launch electric or hybrid versions of their full fleet of vehicles in Europe by 2025.