Abstract: An underbody panel assembly and related method of manufacture is provided. The underbody panel assembly includes an underbody panel coupled to a thermal shield including a plurality of expansion joints. The expansion joints are adapted to accommodate a lengthening or shortening of the thermal shield in response to a corresponding lengthening or shortening of the underbody panel. The related method includes providing an underbody panel, providing a thermal shield including a plurality of expansion joints, and joining the thermal shield to the underbody panel at intervals. The thermal shield can be joined to the underbody panel using a plurality of welds, with each weld being proximate a separate expansion joint. The resulting underbody panel assembly can withstand repeated heating and cooling cycles along a vehicle exhaust, muffler or catalytic converter, while also reducing aerodynamic drag at high vehicle speeds, contributing to an overall increase in vehicle fuel efficiency.