Vehicle Technology & Mobility and Outdoor Recreation Sector Update (Baird)

Summary

• Baird's 46th annual Consumer, Tech & Services Conference gathered over 270 participating companies, approximately 2,500 total attendees, and featured public participants with an average market cap of $3.8B.p.2
• Core business focus is spurring divestitures, such as Driven Brands selling its U.S. car wash business to Whistle in February 2025 to focus on Take 5 Oil Change.p.3
• Supply chain shifts are accelerating, exemplified by Lippert planning to reduce its sourcing from China by ~14% in 2025.p.3
• Capital allocation strategies include share repurchases, with Thor re-authorizing up to $400 million in common stock repurchases over two years.p.3
• Volatile shipping trends are reflected in June's Cass Freight Index reading of 1.052, recovering from early 2024 lows but remaining below pre-pandemic levels.p.5
• Strategic consumer M&A deal volume remains down (~12%) compared to the L5Y average, while ~60% of public VT&M and Outdoor Recreation companies cut or withdrew guidance.p.6
• The estimated U.S. vehicle parc is projected to reach 298.7M in 2025, representing ~0.7% growth from 2024.p.6

Key insights

1. M&A outside of core end markets faces a high bar as strategics trade at multiples near historically low levels.p.3
2. Delays in strategic capital investments are tied to policy uncertainty following the July 9 expiration of the 90-day suspension on reciprocal tariffs.p.3
3. Destocking is mostly complete with right-sized inventory levels nearly finished by the end of 1H 2025.p.4
4. Public management teams are expected to reissue updated outlooks alongside Q2 earnings as tariff impacts become clearer.p.4
5. Pre-order imports caused port volatility and sidelined trucking assets, leading to delayed vehicle repair and maintenance work.p.5
6. Increasing vehicle adoption of ADAS and cameras/sensors is driving higher growth and margin potential in scanning and calibration services.p.5
7. Service-related M&A is projected to stay consistent throughout 2025 due to stable relative performance.p.5
8. Baird RV Dealer Sentiment Scores moved from 33 in May 2025 to 35 in June 2025.p.6