The value of merger and acquisitions transactions in China’s automotive industry slumped 31 percent last year from the year before due to a big drop in profitability as the price war intensified, according to a recent study by British professional services network PricewaterhouseCoopers.

China’s M&As in the auto sector amounted to CNY247.9 billion (USD34.3 billion) last year, according to the London-based firm. Of this, deals among finished car makers came to CNY100.3 billion, those among auto parts manufacturers were worth CNY126.6 billion, and those in the after-sales fields came to CNY21 billion (USD2.9 billion).

And the number of M&A deals in the auto industry last year tumbled 18 percent from the year before to 548, ending three years of increases, PwC said.

Supply outstripped demand in the auto sector last year, said Jin Jun, PwC China automotive industry leader. Intense rivalry meant that carmakers were faced with difficulties in both shipments and pricing. Transactions slumped as investment stalled and profitability contracted.

Despite this, foreign investment, particularly in electric car startups, jumped. Investment by overseas firms accounted for 24 percent of the total in 2023, much more than 2022’s 10 percent, the report said. For instance, Nio secured USD3.3 billion from Abu Dhabi fund CYVN Holdings and Leapmotor bagged EUR1.5 billion (USD1.6 billion) from Dutch auto giant Stellantis.

Chinese vehicle firms also invested more overseas last year. Geely Holding, for example, injected an additional GBP234 million (USD292.7 million) into UK luxury sportscar maker Aston Martin, becoming its third biggest shareholder.

China’s auto industry players are also going public quicker. Thirty-two companies listed last year, 11 more than in 2022, as investors favor the new energy, self-driving and auto parts fields, the report said.

“We expect investments and M&As to gradually recover in the auto industry, as technological innovations are made and the Chinese and overseas markets stabilize,” Jin said.