Automotive Electronics Market

Market Overview

The global automotive electronics market size was valued at USD 303.01 billion in 2022. It is projected to reach USD 691.43 billion by 2031, growing at a CAGR of 9.6% during the forecast period (2023-2031). 

Automotive electronics is used in an automobile for various applications such as ignition, infotainment system, engine management, and telematics to enhance the overall efficiency of the system. The increasing popularity of hybrid and electric vehicles is likely driving the considerable attention of electronic system manufacturers. Additionally, technological advancements such as electrical active suspension and Electronic Braking Systems (EBS) are likely to extend the application range in the automobile sector for an electronic system. The automotive electronics market is witnessing considerable growth and is likely to grow at the same pace in the coming years. This is attributed to the increasing penetration of electric vehicles, increasing demand for advanced safety systems, and continuous development in new and advanced electrical systems such as infotainment, mishap data recorder system, alcohol ignition interlocks, emergency call system, and lighting systems. Moreover, with the increased disposable income, consumers are more likely to buy luxurious electronics features such as automated climate control systems, cruise control, rearview monitor, and advanced entertainment system. According to the National Automotive Board and the Department of Heavy Industry, 260,669 electric vehicles are sold in India.

Market Dynamics

What are the Primary Factors Driving the Market for Automotive Electronics?

Rising Adoption of Hybrid Electric Vehicles and Electric Vehicles

The growing popularity of Hybrid Electric Vehicles (HEV) and Electric Vehicles (EV) is expected to fuel demand for automotive electronics components. Furthermore, replacing mechanical components with electronic components, such as using electronic switches instead of relays, is another way for electronics to address the diverse needs of the automotive industry while efficiently working and reducing the weight of wire harnesses. Hybrid vehicles save fuel by utilizing batteries to support gasoline-powered engines, and their popularity is growing. While the overall auto industry in the United States increased sales by 29% in the first half of 2021, hybrid sales increased by 142%.

Increasing Technological Advancements

Sensor technology advancements that improve navigation and object tracking, advanced braking systems, machine vision, and image processing algorithms have created new opportunities for vehicle companies to investigate a variety of automotive electronics solutions. Size reduction of electronic components, product convergence, and smart device adoption all help to advance the advanced driver assistance and electric vehicle (EV) industries. Vehicle connectivity is regarded as critical in the development of the Internet of Things (IoT). In addition to apps that communicate with one another, future connected vehicles will be able to communicate with their surroundings, resulting in a variety of business opportunities based on the data collected.

What are the Main Factors that Will Slow Down the Market for Automotive Electronics?

Shortage of Semiconductor Chips

The supply-demand gap has broadened across all semiconductor-enabled products. While sales of all consumer goods fell in the first half of 2020, automotive sales fell precipitously—up to 80% in some areas. Vehicle electrification, connected-car features, and advanced driver-assistance systems (ADAS) features are driving up demand for automotive chips. Because of the growing chip shortage, the automotive industry is ordering 10 to 20% more semiconductors than needed to ensure inventory and production. The shortage of semiconductor chips has affected the automobile sector, restraining the automotive electronics market.

What are the Future Opportunities for Automotive Electronics Market?

Government Initiatives to Boost EV Adoption

Governments from around the world are launching new programs and funding initiatives to speed up electric vehicle adoption and decrease CO2 emissions. For example, the French government announced a USD 13,150 incentive to buy electric vehicles in May 2020. The new incentive plan aims to reduce the cost of battery electric vehicles by 40%, accelerating their adoption. These initiatives will further encourage automakers to accelerate the development of new EV models. The Indian Government aims to switch 70% of commercial vehicles, 30% of private vehicles, and 80% of two and three-wheelers to electric vehicles by the year 2030. In September 2021, the Indian government approved Rs 26058 crore to propel domestic manufacturing of electric vehicles in India. Therefore, creating opportunities for the growth of the automotive electronics market.

Regional Analysis

The global automotive electronics market is bifurcated into four regions, namely North America, Europe, Asia-Pacific, and LAMEA.

Asia Pacific Dominates the Global Market

The Asia Pacific is expected to dominate the global automotive electronics market during the forecasted period due to the booming electronic component manufacturing sectors and rising consumer awareness towards vehicle safety features in the region. Additionally, the emerging automotive industry in countries such as Taiwan, South Korea, Malaysia, and Thailand is expected to fuel the growth of the regional market further. On top of that, the rapid adoption of electric vehicles in the Asia Pacific, especially in China, is also likely to foster the automotive electronics market.

North America is expected to witness significant growth in the global automotive electronics market as a result of increasing demand for electric vehicles, rapidly growing adoption of safety equipment, and increasing investments in research and development in the automobile sector for an electric vehicle and self-drive system. On September 1, 1998, Federal legislation made airbags mandatory for all the cars and light trucks sold in the United States. Based on this trend, vehicle manufacturers in North America are continually working on applying new technologies and refining their supplemental restraint systems. According to the U.S. National Highway Transportation Safety Authority (NHTSA), frontal airbags saved 44,869 lives from 1987 to 2015, and 2,756 estimated lives were saved by frontal airbags in 2016.

Europe is expected to witness high growth in the automotive electronics market during the forecast period on account of increasing acceptance of safety certification. European automotive manufacturers are producing vehicles that comply with safety standards. Moreover, most of the world's leading automotive manufacturers, such as Audi, BMW, Daimler, Porsche, and Volkswagen, as well as the world's largest automotive suppliers, such as Bosch, Continental, and ZF, are headquartered in Germany.

LAMEA is expected to witness considerable growth in the automotive electronics market during the forecasted period. This is attributed to the increasing mass vehicle production and increasing demand for a safer, more efficient, and more convenient driving experience. A new electric vehicle manufacturing unit is going to be built in the KIZAD industrial zone of Abu Dhabi.

Segmental Analysis

The global automotive electronics market is segmented by vehicle type, component, sales channel, and application.

Based on vehicle type, the global market is bifurcated into compact passenger cars, mid-sized passenger cars, premium passenger cars, luxury passenger cars, light commercial vehicles, and heavy commercial vehicles.

The compact passenger cars segment is the highest contributor to the market and is expected to grow at a healthy CAGR during the forecast period owing to benefits offered such as affordability, easier maneuvering, better mileage, and others. And many leading automotive vehicle manufacturers are entering the compact passenger cars segment. For instance, In 2022, Tata Motors launched a new compact passenger electric vehicle which is gaining significant traction in the Indian market.

The light commercial vehicle segment is expected to witness a higher CAGR. Electric commercial vehicles have revolutionized the world of transportation due to their lower carbon emissions, increased efficiency, and a variety of other features. These vehicles are becoming a popular mode of transportation due to their low maintenance costs and low noise pollution. Because of their lower noise pollution and lower maintenance costs, these vehicles are becoming a popular mode of transportation. Electric vehicles are catching up to conventional vehicles and becoming a viable transportation option in the future.

Based on components, the global market is bifurcated into the electronic control unit, sensors, and current carrying devices

The current carrying devices segment is the highest contributor to the market and is expected to grow at an impressive CAGR during the forecast period. Electronic switches, connectors, fuses, and wiring harnesses are examples of current-carrying devices. The substantial growth of current-carrying devices is due to the high cost and large number of electronic components used in the vehicle, such as electronic switches, connectors, fuse, and wiring harnesses. This segment's expansion can also be attributed to increasing demand for connectivity, convenience, and safety features in both passenger cars and commercial vehicles.

The sensors segment is expected to witness a higher CAGR. The sensors segment includes sensing devices that detect physical parameters, vehicle proximity and positioning, chemical properties, and process variables. Revenue growth is expected to be driven by favorable government policies for passenger safety and security in various areas. These devices have become an essential component of automobiles because they identify parameters such as heat, speed, tire pressure, and condition and take precautionary measures in the event of danger.

Based on sales channels, the global market is bifurcated into original equipment manufacturers and aftermarkets.

The original equipment manufacturer segment is the highest contributor to the market and is expected to grow at a healthy CAGR during the forecast period. Original equipment manufacturers are the original producer or developers of a vehicle's parts or components and sell the product to a principal partner, who resells the product, usually directly to the public, under its own brand. Growing competition in the automotive industry is likely to drive the market.

The aftermarket segment is expected to grow at a significant rate. The term "aftermarket" refers to the automotive industry's secondary market, which is involved with the manufacturing, retailing, distribution, and installation of all electronic parts and accessories of a vehicle following the sale of the automobile by the OEM to the consumer. 

Based on application, the global market is bifurcated into advanced driver assistance systems, safety systems, entertainment, powertrain, and body electronics.

The automotive safety systems segment is the highest contributor to the market and is expected to grow at a healthy CAGR during the forecast period. There are various parts or components included in automotive safety systems, such as airbags, pedestrians, whiplash protection, and others. The airbag is one of the vital components of automotive safety systems and is applied in every automotive vehicle; it is likely to gain a larger market during the forecast period 2023-2031.

The advanced driver assistance system segment is expected to grow at a significant rate. Because of the increased applications and functionalities of the sensors, the demand for ADAS sensors is growing at an exponential rate. Sensors are an essential component of ADAS. Sensors are used individually or in combination to perform complex functions ranging from basic stereo cameras to the most recent LiDAR. As a result, the rising demand for automated driving is expected to increase the need for automotive electronic components over the forecasted period.

Recent Developments

• In January 2021, Aptiv PLC launched a next-gen advanced driver-assistance system (ADAS) platform for automated vehicles.  
• In September 2022, Aptiv reached an agreement to acquire intercable automotive solutions.
• In July 2022, Tokai Rika Co. Ltd. will establish a new manufacturing plant in India.