The automotive industry is navigating a treacherous landscape on this last day of September 2025, battered by faltering electric vehicle (EV) adoption, punitive tariffs, and escalating cybersecurity threats. Legacy carmakers, once titans of manufacturing, now face depressed valuations as investors shy away from their sluggish pivot to electrification and mounting operational risks. Private equity (PE) firms, flush with capital and eyeing undervalued assets, see opportunity in this turmoil. With M&A activity gaining steam despite geopolitical tensions, firms like Apollo or KKR are poised to swoop in, targeting companies with strong brands, global reach, and cash flows ripe for restructuring. The allure lies in acquiring at low multiples, slashing inefficiencies, and flipping for profit in a sector struggling to redefine itself against nimble Chinese EV rivals and software-driven innovators.
Enter Honda and Ford, two giants whose vulnerabilities make them prime PE targets. Honda’s bold retreat from EVs—slashing $20 billion in investment and halving sales goals to 2027—reflects weak demand and soaring battery costs, pivoting instead to hybrids with a 2.2 million-unit target by 2030. Its stock, up 20% YTD, trades at a bargain forward P/E of 6.5, undervaluing its $50 billion market cap and global footprint. Ford’s woes are equally stark: its Model e EV division bleeds $1.1 billion quarterly, dragged by warranty costs and fading incentives, while a flat 2025 EBIT outlook highlights labor disruptions and reliance on gas-powered F-150s. Despite a 26% YTD stock gain, Ford’s $48 billion valuation and P/E under 7 scream undervaluation. Both lag in software, taking twice as long as Tesla to develop vehicle tech, eroding competitiveness.
External pressures amplify their exposure. Trump’s 25% tariffs on imports crush Honda’s U.S. sales, 40% sourced from Japan and Mexico, inflating costs without pricing power. Ford, more domestic, still faces export retaliation. Recalls—6 million vehicles pulled in fall 2025 for fire and brake issues—pile on $10 billion in combined liabilities, while ransomware, now 45% of cyber incidents, threatens operations. PE sees a playbook: acquire cheap, divest non-core assets (like Honda’s motorcycles), boost hybrid production, and shore up cyber defenses for 20-30% EBITDA gains. Yet, risks like integration hiccups and union resistance loom. As Chinese EVs dominate with subsidized batteries, Honda and Ford’s distress signals a golden window for PE to reshape—or dismantle—these legacy giants.
Will it happen? And do you see the potential takeovers as good or bad for Honda and Ford?