In this episode of the Advanced Manufacturing and Mobility Business Minute podcast, speakers Raman Ram, Mike Cadenazzi and Mike Iacono examine the turbulence shaping the aerospace and defense sector.

While airlines are placing more orders, supply chain issues and safety concerns are impeding production rates. Pilot shortages have become an issue, particularly for regional carriers. In terms of deal activity, private equity has championed creative financing solutions and has emerged as a net buyer despite complex market fundamentals.

Regulatory scrutiny remains a significant concern, necessitating proactive planning and engagement with antitrust counsels. Furthermore, sellers are increasingly evaluating prospective buyers for their ability to close deals without regulatory hiccups.

Industry leaders anticipate more orders, new solutions to supply chain issues, updates on sustainability challenges and technologies, and more transaction announcements in 2024. As businesses focus on strategic portfolio rationalization, private equity is expected to play an increasingly important role in driving transaction volume and deal value.

The podcast also includes perspective from EY Americas A&D Leader Raman Ram and EY Americas A&D Managing Director Mike Cadenazzi, as well as EY Americas Strategy and Transactions Partner Mike Iacono, on where larger deals are getting done in the A&D sector.

Key takeaways:

• North American airlines were profitable last year and it's expected that the rest of the world's airlines will also be in the black this year.
• Despite underwhelming market fundamentals, private equity is leveraging sector resiliency and capital availability to continue with strong buying.
• While pilot shortage is a looming issue, fleet availability is seen as a more immediate concern.
• Strategic buyers continue to shape their portfolios, even as they remain cautious about buying.

In this episode of the Advanced Manufacturing and Mobility Business Minute podcast, EY analysts Anuj Chandna and Angsuman Sharma share insights from the latest EY Electric Vehicle Country Readiness Index.

The EY Electric Vehicle Country Readiness Index (EVCRI) examines global auto markets and their preparedness for an electric vehicle (EV) future. The most recent index evaluated 20 crucial EV markets, representing over 93% of worldwide EV volumes, to gauge their maturity.

The index evaluates three fundamental areas — supply, demand and regulatory — to determine what works in driving the overall EV ecosystem and the best practices for each country. 

China continues its dominance of the EV market, remaining the undisputed leader in electrification of its vehicle market. Norway retains the second position in electrification, with the US, Sweden and the UK completing the rest of the leadership positions. 

Rising fuel costs, increasing availability of EV models and swelling penalties on internal combustion engine (ICE) vehicles encourage consumer adoption of EVs across the globe. However, the lack of charging stations and higher upfront cost of EVs continue to be concerns. 

Key takeaways:

• Factors such as fuel costs, availability of EV models and charging stations, penalties on ICE vehicles and cost of vehicles influence consumer decisions.
• Key markets are rapidly developing their own local EV ecosystem and addressing the issues in the battery supply chain.
• Public-private partnership is the way to invite investments in developing charging infrastructure.
• Regulators and policies wield significant influence in fostering EV ecosystems.

In this episode of the Advanced Manufacturing and Mobility Business Minute podcast, Raman Ram and Mike Cadenazzi discuss what lies ahead for the aerospace and defense (A&D) sector.

While the war in Ukraine continues to drive innovation in the defense industry, defense spending in the US and across Europe has been restrained as countries prioritize reducing deficits accrued during the COVID-19 pandemic. On the commercial aerospace side, airlines and major network carriers are seeking to clear debt from their balance sheets in anticipation of expected increases in air travel demand.  

This recurring theme of fiscal prudence was also evident in the number of orders placed at Paris Air Show 2023, which came in less than industry analysts had been expecting. At the same time, the US is investing more money into its industrial base to build a new fleet of submarines, and is also making significant investments in ammunition production to support Ukraine. Will these investments open the door to more robust defense spending in the face of ongoing geopolitical uncertainty? 

The podcast also includes perspective from EY Americas A&D Leader Raman Ram and EY Americas A&D Managing Director Mike Cadenazzi on the readiness of the supply chain to support stronger levels of production in both the defense and commercial aerospace sectors.

Key takeaways:

• Air traffic demand is projected to double by 2040.
• Per passenger profits have increased to over US$2, after being in the negative in 2022.
• Competitive intensity in the A&D sector is not bringing down the yield.
• Supply chain will play a pivotal role in the ability of A&D companies to meet market demands.