Financing the Future of the Automotive Industry
Financing the Future of the Automotive Industry
The automotive industry has long served as a bellwether for the broader economy, and over the past several years, it has been repeatedly stress-tested by supply chain disruptions, inflationary pressures, interest rate volatility, shifting trade policy, and now a recalibration of electrification expectations. Financing across the value chain, from OEM Tier 1 and 2 suppliers to the aftermarket, has evolved materially under these conditions, reshaping how investors and operators must approach the sector to remain competitive.
According to a Configure Private Credit Quarterly report, approximately 15% of the lender universe remains actively risk-off, while fewer than 10% are fully risk-on. The remaining ~75% of lenders are operating in a mode of “selective evaluation,” underwriting opportunities on a case-by-case basis. In today’s environment, that diligence increasingly incorporates not only tariff exposure, but also customer concentration, EV transition risk, and supply chain resiliency.
Importantly, the lender universe for automotive remains constrained, consistently ranking among the least favored sectors. As a result, companies seeking financing must proactively identify, quantify, and mitigate risks before entering the market, as lenders are less willing to underwrite uncertainty than they were even 12–18 months ago.
Aftermarket vs. OE Supply
When segmenting automotive businesses by sales channel, the divergence between aftermarket and OEM suppliers has only become more pronounced.
Aftermarket businesses continue to attract greater lender interest, and for good reason. The average age of vehicles on U.S. roads has continued to climb, now exceeding 12.5 years. Persistent affordability challenges, elevated interest rates, and still-high vehicle prices are driving consumers to maintain existing vehicles rather than replace them.
At the same time, higher-income consumers and automotive enthusiasts remain resilient in discretionary spending, supporting demand for performance upgrades and specialty services. As a result, the aftermarket has demonstrated durability across cycles and continues to be a focal point for private equity investment — particularly in collision repair, parts distribution, and specialty services.
In contrast, OEM suppliers remain more exposed to macroeconomic volatility, production variability, and shifting regulatory frameworks. The past five years have been especially turbulent, with COVID-related disruptions followed by inflation, semiconductor shortages, and ongoing trade policy uncertainty.
Recent tariff dynamics and geopolitical tensions have further complicated global supply chains. While domestic OEMs such as Ford, General Motors, and Stellantis have, at times, benefited from shifting trade policy and localization trends, their multinational supply chains remain inherently complex and vulnerable to policy changes.
Meantime, evolving regulatory priorities, including the recent easing of fuel economy standards, have introduced additional uncertainty around the pace and direction of electrification investment. This has created both opportunities and challenges for suppliers, particularly those heavily exposed to EV platforms.
Configure’s Experience in the Market
Interestingly, recent deal activity observed by Configure has been somewhat counterintuitive relative to broader market sentiment.
Despite stronger lender and sponsor preference for aftermarket businesses, we have seen a disproportionate amount of transaction activity tied to OEM suppliers. This is partly a function of our focus on complex situations, where sponsors are more likely to engage external capital markets expertise to navigate challenging underwriting dynamics.
It also reflects a broader shift in sponsor behavior. With significant dry powder still in the system and pressure to deploy capital, sponsors are increasingly willing to pursue opportunities in more complex or out-of-favor segments — provided they can identify clear pathways to value creation.
That said, underwriting for OEM-related credits remains highly bespoke. Lenders are scrutinizing each opportunity individually, with a heightened focus on downside protection, customer diversification, and structural mitigants.
Case Studies
Configure closed three financings involving Tier 1 automotive suppliers over the last six months. In each case, successful execution required tailored positioning to address lender concerns and highlight differentiated credit strengths.
Project Paint is a supplier and servicer of specialty chemicals primarily for automotive OEMs, with notable customer concentration. Configure positioned the business as a full-service recycler with inherently recurring revenue driven by the embedded nature of its offering. Customer concentration risk was mitigated through long-standing relationships and multiple operational touchpoints across facilities.
Project Plastic is a global manufacturer of structural and aesthetic exterior components. Configure emphasized supply chain integration and proximity to customers as key barriers to entry, while also highlighting identifiable operational synergies that offset near-term financial performance variability.
These transactions underscore the importance of narrative and positioning in today’s market —particularly in sectors where lenders are predisposed to caution.
Looking Ahead
As we move further into 2026, there are signs of stabilization across both the automotive sector and the broader M&A environment. However, the industry remains in flux.
Recent high-profile bankruptcies, including First Brands and Tricolor, have reinforced lender caution and underscored the importance of disciplined underwriting. At the same time, policy developments continue to shape the landscape. The anticipated USMCA review in mid-2026 introduces another layer of uncertainty for cross-border supply chains, while evolving regulatory priorities are influencing capital allocation decisions across OEMs and suppliers alike.
Beyond sector-specific dynamics, broader geopolitical uncertainty is increasingly shaping the automotive landscape. Ongoing global tensions have reinforced concerns around supply chain resilience, access to critical components, and the stability of cross-border trade flows. For lenders and investors, this has translated into a heightened focus on geographic exposure, supplier concentration, and contingency planning. Companies with complex international supply chains or reliance on concentrated sourcing are facing increased scrutiny, while those that can demonstrate localization strategies, diversified procurement, and operational flexibility are better positioned to access capital.
Meanwhile, the EV transition is entering a more measured phase. Rather than the rapid, linear adoption once expected, the market is now characterized by regional variability, infrastructure constraints, and shifting consumer demand — requiring both investors and operators to recalibrate expectations.
Against this backdrop, we expect automotive deal activity to gradually rebound alongside the broader M&A market. However, success will require a more nuanced approach to risk assessment, structuring, and lender engagement.
In today’s environment, autopilot is not an option.
About Configure Partners
Configure Partners is a credit-oriented investment bank specializing in debt placement. The firm provides the highest level of client service and execution to middle-market private equity sponsors in acquisition finance, refinancing, and dividend recapitalization transactions, with expanding expertise in cross-border transactions. Configure is one of the largest firms dedicated to debt advisory. We’ve developed our processes and systems to ensure execution across all types of financing transactions. Unlike other debt placement groups, we don’t treat debt advisory as a secondary service offering to M&A — debt placement is a core part of our business.
Importantly, we consider ourselves an extension of our clients in the market, and we treat lenders accordingly. The cumulative effect of this approach is particularly powerful in a more difficult financing environment where debt capital is less “abundant.” The results of the Configure methodology speak for themselves, with over 80% of our revenue coming from a repeat source of business.
If the above article has sparked a question or thoughts concerning financing an automotive company, please feel free to reach out to any of our Configure team members or visit our website at https://configurepartners.com/.
About James Bardenwerper
James joined Configure Partners in 2018 as an Associate and was promoted to Director in 2024. Before joining Configure Partners, he was at Genuine Parts Company, supporting merger and acquisition efforts and strategic planning. He began his career as an Analyst at SunTrust Robinson Humphrey, where he spent three years advising clients on debt and equity capital raises across various industries.
James received a bachelor’s in Finance from the University of Kentucky. He is a FINRA General Securities Registered Representative (Series 79, 63).