Automotive Aftermarket Sector Update – October 2025

Automotive Aftermarket Sector M&A Dips from Tariff Volatility, Capstone Discusses ADAS Calibration with Founder of ADAS Solutions USA

The Automotive Aftermarket sector has grappled with shifting tariff policies that have targeted vehicles, parts, and inputs from key trade partners to start 2025, contributing to contraction in the sector’s merger and acquisition (M&A) market. Amid this ongoing trade policy volatility, investors and aftermarket businesses have continued to evaluate the impact of technology-enabled services on the aftermarket, namely via advanced driver assistance systems (ADAS) calibration. Included in this article is a recent interview Capstone conducted with ADAS Solutions USA Founder and COO, Jerry Cathcart, to discuss the evolution of ADAS calibration, market dynamics, and the outlook for ADAS in the Automotive Aftermarket sector.

Leading operators and investors have increasingly evaluated opportunities within tech-enabled aftermarket services—namely ADAS diagnostics and calibration. As vehicles become increasingly complex and ADAS more commonplace, both collision repair and general repair operators will have to evolve alongside the car parc and offer competitive solutions for a growing customer base that is increasingly in need of these mission critical services.

Yogesh PunjabiManaging Director, Capstone Partners

Automotive Aftermarket Sector M&A Declines Amid Tariff Headwinds, Pressures Expected to Abate with Trade Clarity and Continued Rate Cuts

M&A activity in the Automotive Aftermarket sector has reached 194 transactions announced or completed year to date (YTD), 15.7% below YTD 2024 which saw 230 deals. Macroeconomic uncertainty stemming from volatile trade policy has pressured dealmaking with business owners exercising elevated caution when considering taking their business to market. Strategic buyer activity has declined 21.3% year-over-year (YOY). Alternatively, private equity (PE) buyers have comprised 50.6% of total sector deal volume, the first time this asset class has accounted for the majority of sector deals since 2022. Platforms have jumped to 14 deals in YTD 2025 from 12 in YTD 2024 while add-on activity has declined by 12 deals YOY with 84 acquisitions by sponsor-backed companies YTD. Capstone expects strategic and PE acquisitions to gain momentum moving through year end and into 2026, especially as tariff fog clears and additional interest rate cuts are realized.

ADAS Calibration Services Emerge as Area to Watch in the Automotive Aftermarket Sector

Vehicle technology advancements in the form of ADAS have created a relatively underpenetrated but budding segment of the Technology-Enabled Services market. ADAS encompasses a wide array of technology-enabled safety features, including lane keep assist (LKA), autonomous emergency braking, forward collision warning, 360 degree viewing systems, and traffic sign recognition. ADAS deployment in vehicles has risen dramatically in recent years and is expected to continue growing. Notably, 74% of the U.S. car parc has some form of ADAS, according to Brent Kirby, President of O’Reilly Automotive (Nasdaq:ORLY), at the company’s 2024 analyst day.¹ While adoption has steadily increased, ADAS calibration capabilities within auto body shops have historically been low as these features were not commonplace just 10 years ago. For example, forward collision warning penetration increased from 12.8% in model year 2015 vehicles to 94% in model year 2023 vehicles, according to a Partnership for Analytics Research in Traffic Safety (PARTS) report.² Only 11% of repair and collision shops offered in-house ADAS calibration services in 2024 and an additional 12% plan to offer ADAS in the next year, according to Professional Tool & Equipment News (PTEN).² The remaining 77% of shops reported outsourcing ADAS services, indicating ample white space for service providers to expand into the growing market. Of note, 90% of muti-store operators (MSOs) are expected to be ADAS capable by 2030 and the ADAS Aftermarket is anticipated to reach $2.3 billion by 2031, growing at a compound annual growth rate (CAGR) of 17%, according to Global Market Insights.⁴ This accelerating demand for ADAS services has created significant expansion potential as each ADAS-equipped car may bring in an extra $500 to $2,000 per repair. Auto body shop owners will likely need to evolve in tandem with the technology advancements in the car parc and offer solutions for customers requiring ADAS calibration to remain competitive. Capstone has highlighted these technology-enabled service providers as players to watch moving forward.

Capstone Speaks with ADAS Solutions USA on Technology Advancements and Collision Services Demand for ADAS Calibration Capabilities

Jerry Cathcart, Founder & COO

Capstone spoke with Jerry Cathcart, Founder & COO of ADAS Solutions USA, to discuss its business model, the evolution of technology-enabled aftermarket services, and the impacts of advancements in ADAS technology in the regulatory environment. Mr. Cathcart has worked in the Automotive industry since the age of 16. Prior to founding ADAS Solutions, his experience included serving as Senior Corporate Operations Manager at ABRA Auto Body & Glass and offering freelance collision consulting. As COO of ADAS Solutions, Mr. Cathcart has driven the company’s vision and expansion opportunities alongside his partner, Daryl Bennett (CEO) and Cliff Mayer (Vice President of Business Development).

ADAS Solutions operates physical static calibration centers, offering end-to-end diagnostic and calibration services on ADAS. Founded in 2021, ADAS Solutions has nine locations across Colorado, Missouri, Tennessee, and Texas, with a team of diagnostic, calibration, programming, and alignment technicians boasting more than 75 years of experience in the Collision industry. To learn more about ADAS Solutions USA, visit www.adassolutionsusa.com.

What is your background and what led you to start your first ADAS calibration business?

I started my career in the Automotive industry 35 years ago, when I was 16. I got involved in the Collision business and worked my way up the ladder at several of the large MSOs around the country. I heard a presentation in 2012 while I was with ABRA Auto Body & Glass from Jake Rodenroth, who was the Director of Industry Relations for asTech at the time. He connected to a 2012 Cadillac and showed us the original General Motors [NYSE:GM] diagnostic systems. We found out that the vehicle had the wrong oil in it, with the wrong viscosity and that it would void the warranty. That was the beginning of my intrigue with electronics and understanding its role in collision repair.

In 2015, I got heavily involved in the technical repair, diagnostics, and ADAS development of vehicles. It was so new and no one understood what it was. I began getting trained on the technology and made the decision to open my first calibration center. In August of 2020, I started my first ADAS company. The business model really started taking off and in the fall of 2021, I asked Daryl Bennett and Cliff Mayer to invest and help grow the brand, the company, and bolster our impact on the overall industry. We were very fortunate to start in the Colorado market and have opened eight locations in a short period. Since then, we have expanded into the Dallas, Texas, and Memphis, Tennessee markets and plan to expand our footprint extensively across key markets.

How has ADAS Solutions differentiated itself in the fast-growing market for aftermarket calibration?

We open calibration centers to effectively service vehicles based on the manufacturer’s designations and the OEM [original equipment manufacturer] service requirements—including level floors, controllable lighting, etc. We control for all factors that enable proper vehicle calibration. When we control the environment, we can control the outcome, rather than just clearing codes. Holistically, we are a diagnostic calibration and programming company. Most calibration companies calibrate vehicles. Most diagnostic companies just diagnose the problem but don’t understand how to fix it. We’ve incorporated all three components—diagnostics, calibration, and programming—into a standardized system. We have level one, level two, and level three technicians, so as we continue to grow the business, we have training infrastructure in place to grow our technician base without sacrificing expertise and quality.

We built ADAS Solutions USA with the idea of doing the best calibrations that can be done. It’s the reason we invest so heavily in technology, location, and personnel, because we understand calibration’s importance. We foster great relationships with our customers and make doing business with us as easy as possible. We come pick up the car, we bring it to our location, we calibrate it, and we bring it back to our customer. It could not be simpler than that. Simplicity allows everyone to win.

With vehicle complexity rapidly increasing, why have so many collision repair operators been slow to incorporate ADAS calibration services?

There is approximately a 27% calibration rate happening on vehicles that should be calibrated. That means 73% of calibration needs are not met today. The bigger problem we run into is that on those 27% of vehicles being calibrated, 50% of them are done incorrectly, largely due to a lack of following manufacturer-defined standards. You will find some service providers simply clearing codes and sending the vehicle on the road. They are performing the service in a mobile van, in parking lots outside, and in the middle of body shops with metal all around instead of open areas that the manufacturer requires. We receive a lot of reworks from mobile providers, dealerships, and other companies including some of the largest glass companies in the world. Our approach is differentiated for many reasons, but a major difference is our commitment and capability to perform proper calibration. Adding to vehicle complexity are the OEMs, requiring alignments to be completed, before or after calibration in most late model vehicles. This is creating an opportunity and a situation for most tire and alignments brands. How do you explain this to the consumer properly? Most big-name brands are working through these struggles, which is turning them to us, to assist in creating a fix for the consumer. With all of this, it is creating a lager opportunity for our brand to capitalize on the mechanical needs for the Collision, Mechanical & Glass industry.

What key technological, economic, or regulatory trends are you seeing within the Automotive Aftermarket Service ecosphere?

The U.S. government had said that by 2027, adaptive emergency braking will be mandatory on all vehicles sold in the U.S. That target was pushed to 2029 due to the pandemic. Reverse emergency braking will likely follow in 2032. With that guidance, every vehicle will have the capability to stop in emergency situations, meaning radar systems to detect these situations will be mandatory across the board. Collisions are still going to happen, so radar systems are going to need static and dynamic calibration, depending on the manufacturer. Before dynamic calibration can take place, accurate static calibration must be completed first, otherwise the vehicle starts to pick up odd lane counts, lane dividers, guardrails, stop signs, and so on, further driving the need for these services. Most of the manufacturers by 2027 to 2029 will have a sign depiction system while technology will only get more complex.

For example, we are a Rivian [Nasdaq:RIVN]-certified company and were at the Rivian National Convention in August 2024. At the convention, I provided an example of the rapid technological development using a 2015 Toyota [TSE:7203] Tundra. This vehicle had a module that ran front parking sensors and rear parking sensors. The following year, a module ran both parking sensors that plugged in together and had a wiring harness that plugged into the ECU [electronic control unit]. Toyota added a module per new harness. Then they added two blind spot monitors with four modules. By 2018, there were almost 140 modules in that same vehicle running the safety system. The following year, they added almost 60 modules to total around 200. Now what we are seeing is companies putting 10 hard drives into one module. Instead of having 200 modules, they are going to have one module running 112 different items in the vehicle. If service providers don’t understand how to back into that and get to that module, they will never service the vehicle properly. We are really seeing rapid technological advancement and regulatory actions converge and underscore the need for static calibration.

How do these trends impact your business strategy and growth opportunities?

The expansion is astronomical in my eyes. Our goal is to operate between 100 and 1,000 locations. The U.S. needs 35,000 calibration centers across the country and that’s about what we are short of today. That will change by the time fully adaptive braking vehicles come into place with emergency stop functionality, and once we get into level four and level five self-driving vehicles. We try to analyze our growth in six-nine-12-month increments. As we continue to grow, those plans will move to six, 12, 36 months. A lot can change in a three-year period. Our first location’s equipment, which we opened three years ago, is relatively obsolete today. It can still be utilized and used wisely, but it sheds light on the rapid evolution of the space. Ultimately, the opportunity will be astronomical. We’re changing the Collision industry one vehicle at a time.

To discuss the rising demand for ADAS servicing capabilities in the Collision segment, technology advancement in the aftermarket, provide an update on your business, or learn about Capstone’s wide range of advisory services and Automotive Aftermarket sector knowledge, please contact us.

Andrew Woolston, Associate, was the lead Market Intelligence contributor to this article.

Endnotes

1. O’Reilly Automotive, “O’Reilly Automotive Analyst Day 2024,” https://edge.media-server.com/mmc/p/ejxhywsu/, accessed September 17, 2025.

2. PARTS, “PARTS: Market Penetration of Advanced Driver Assistance Systems (ADAS), https://www.mitre.org/sites/default/files/2024-09/PR-24-2614-PARTS-Market-Penetration-Advanced-Driver-Assistance-Systems.pdf, September 17, 2025.

3. Professional Tool & Equipment News, “2025 Aftermarket Profile,” https://www.vehicleservicepros.com/training-and-resources/whitepapers/whitepaper/55279263/2025-aftermarket-profile, accessed September 17, 2025.

4. ADAS Solutions USA, “What are the Requirements for Accurate Static Calibration,” https://www.adassolutionsusa.com/faq-resources/tour-our-calibration-facilities, accessed September 17, 2025.