Diesel Engine Market Size, Share & Trends Analysis Report By Component (Processor, Discrete Power, Sensor, Memory, Others), By Vehicle Type (Passenger Vehicle, Light Commercial Vehicle (LCV), Heavy Commercial (HCV)), By Applications (Chassis, Powertrain, Safety, Telematics & Infotainment, Body Electronics), By Propulsion Type (Internal combustion engine, Electric) and By Region(North America, Europe, APAC, Middle East and Africa, LATAM) Forecasts, 2025-2033

Diesel Engine Market Size

The global diesel engine market size was valued at USD 50.4 billion in 2024 and is projected to grow from USD 53.6 billion in 2025 to reach USD 86.9 billion by 2033, growing at a CAGR of 6.22% during the forecast period (2025-2033). 

A diesel engine is an internal combustion engine that relies on compression ignition to burn fuel, typically diesel, to power vehicles, machinery, and industrial equipment. Unlike gasoline engines, diesel engines are known for their efficiency and durability, making them ideal for heavy-duty applications that require high-torque output, such as construction, transport, agriculture, and power generation.

The global market is dominated by booming industrialization and rising investments in infrastructure, particularly in emerging economies, which have led to a surge in diesel engine applications across various sectors. In regions like North America and Europe, while the market remains substantial, growth is occurring at a more measured pace. This is largely due to increased regulatory pressures aimed at reducing emissions and a shift toward cleaner energy alternatives.

In these regions, there is a growing emphasis on hybrid and electric solutions, with diesel engines increasingly being integrated with advanced technologies to meet sustainability goals. However, diesel engines continue to be critical in sectors such as construction and agriculture, where high power output and reliability are paramount. The ongoing development of cleaner and more efficient diesel engine technologies is expected to support their relevance and demand in these industries for the foreseeable future.

Source: Annual Reports, Investor Presentations & Straits Research Analysis

Diesel Engine Market Trend

Renewable diesel and biofuels integration

The integration of renewable diesel and biofuels into the global diesel engine market is gaining momentum, driven by rising concerns over environmental sustainability and climate change. Renewable diesel, produced from biomass or waste oils, is chemically identical to petroleum-based diesel but has a significantly lower carbon footprint. This shift towards cleaner fuel sources is gaining traction, particularly in regions like California, where the Low Carbon Fuel Standard (LCFS) incentivizes the use of renewable diesel.

In addition, U.S. federal tax credits have encouraged producers to invest in biofuel production, further driving the market.

• For example, in 2023, renewable diesel production in the U.S. reached over 3 billion gallons, supported by companies like Neste and Marathon Petroleum, which have made substantial investments in renewable diesel plants.

This surge in renewable diesel production is helping to reduce emissions from the transportation and industrial sectors, thus meeting stricter environmental standards while maintaining the power and reliability of diesel engines.

Diesel Engine Market Growth Factors

Demand for diesel in developing economies and infrastructure growth

It remain critical in developing regions due to their reliability and versatility in sectors like infrastructure, transportation, and energy production, where electrification options are often limited or impractical. In many parts of Africa, South America, and Asia, diesel-powered equipment is vital for industries such as agriculture, mining, and transport. Diesel engines provide a dependable energy source, especially in areas where access to stable power grids is scarce.

• The U.S. Energy Information Administration (EIA) has upgraded its forecast on diesel fuel consumption, projecting a sharp increase in demand across non-OECD countries through 2050, driven by economic growth and infrastructure expansion.
• In particular, energy consumption in these regions is expected to rise by nearly 50% between 2020 and 2050, mainly due to population growth and the ongoing development of key industries in Asia, Africa, and Latin America.

This trend underscores the continued strength of diesel demand, as it remains a cornerstone of industrial development and energy access in emerging markets.

Market Restraint

Environmental regulations and shift to electrification

Environmental regulations and the global shift toward electrification are key factors restricting the growth of the global market. Governments worldwide are increasingly implementing stringent emission standards to combat climate change, making it more challenging for diesel engines to meet environmental requirements. These regulations particularly affect industries like transportation, where diesel engines contribute significantly to air pollution.

Moreover, diesel engines face operational challenges in extreme climates, particularly in regions with extreme cold or heat. In very high temperatures, semiconductor devices in diesel engines can fail due to increased resistance, leading to weakened signals or melting of components. Conversely, extremely cold temperatures can impair the functionality of semiconductors, with operational ranges typically between -25°C and +150°C.

This operational instability in harsh climates, such as in Canada or Russia, is driving consumers to opt for alternative energy solutions, such as electric engines, further limiting the growth of diesel engines in these regions.

Market Opportunity

Advances in diesel engine efficiency and emission reduction technologies

The global market is witnessing significant opportunities driven by advances in diesel engine efficiency and emission reduction technologies. Innovations such as turbocharging and common rail direct fuel injection systems have improved fuel efficiency, allowing engines to extract more power from less fuel.

• For instance, Cummins' X12 engine, which incorporates advanced fuel delivery and combustion technologies, offers improved fuel efficiency while reducing emissions.

Additionally, selective catalytic reduction (SCR) and exhaust gas recirculation (EGR) systems have become widely adopted to meet stringent emissions standards. Manufacturers like Volvo Penta have integrated these technologies into their marine diesel engines to reduce nitrogen oxide (NOx) and particulate matter (PM) emissions. These advancements enable diesel engines to continue playing a vital role in sectors like transportation and agriculture, where power, durability, and fuel efficiency are crucial.

As governments worldwide tighten emissions regulations, demand for cleaner, more efficient diesel engines is expected to grow, presenting lucrative opportunities for industry players.

Regional Insights

Asia-pacific: dominant region

The Asia-Pacific region holds the dominant share of the global market, driven by the rapid expansion of the automotive sector, particularly in emerging economies such as China, India, and Japan. China, as the regional leader, is expected to maintain its position throughout the forecast period, largely due to its robust manufacturing base and high demand for diesel engines in heavy-duty vehicles, including trucks and construction equipment.

The growing e-commerce sector in the region is also anticipated to significantly boost the demand for commercial vehicles, further fueling the market's growth. Moreover, the increasing urbanization and infrastructure development in countries like India are expected to accelerate the adoption of diesel-powered vehicles, especially in logistics and transportation.

Europe: rapidly growing region

Europe is projected to experience the second-highest compound annual growth rate (CAGR) during the forecast period. The market's growth in Europe is largely driven by the rising demand for electric vehicles (EVs) and the increasing shift toward cleaner transportation solutions. European automakers are focused on innovating autonomous and electric vehicles, which have gained significant traction among consumers.

In particular, the automotive industry is heavily investing in semiconductor technologies to enhance vehicle performance, improve energy efficiency, and enable the development of fully autonomous cars. As consumer preferences evolve toward smart, connected, and autonomous vehicles, the demand for high-performance diesel engines is expected to persist, driving innovation in diesel engine technology in the region.

Countries Insights

• United States: The United States is a crucial market, with rising demand driven by advanced driver-assistance systems (ADAS) and electric vehicles (EVs). As the U.S. continues to invest heavily in semiconductor research and development, accounting for 10.3% of sales in this sector, the automotive industry's reliance on these technologies for smarter, more efficient vehicles grows. This ongoing innovation enhances diesel engine performance, contributing to the demand for high-tech solutions in both electric and traditional vehicle systems.
• China: China, the world’s largest semiconductor consumer, is at the heart of the largest automotive market. The rapid growth in electric and connected vehicles is increasing the demand for diesel engines as the government pushes efforts to boost EV production. Recently, China announced that 19 government and state-owned investors would contribute an additional $47 billion to the third phase of the National IC Fund, supporting innovation and production in semiconductor technologies. This investment is expected to further drive automotive sector advancements, including in diesel engine applications.
• Taiwan: Taiwan plays a significant role in the global diesel engine supply chain as the largest contract manufacturer of integrated circuits. The Taiwanese government actively supports the sector through the Taiwan Semiconductor Industry Association (TSIA), fostering innovation in process technologies and packaging solutions. Taiwan's dominance in high-end semiconductor production is pivotal, contributing 92% of the most advanced manufacturing capacity. This competitive advantage is key to enabling automotive manufacturers worldwide to integrate advanced technologies, ensuring that diesel engines meet the rising demands for efficiency and connectivity.
• South Korea: South Korea is a key player in memory and logic integrated circuits, essential for automotive applications. The country’s K-Semiconductor Strategy, with investments of $450 billion by 2030, focuses on enhancing the semiconductor ecosystem, particularly in advanced chips for artificial intelligence and memory solutions. This initiative includes a $6.8 billion investment by SK Hynix to establish a new semiconductor manufacturing plant by July 2024. These advancements will support the growing demand for sophisticated automotive systems, including those in diesel-powered and electric vehicles.
• Germany: Germany, a leading hub for major automotive manufacturers, is an essential market for high-performance semiconductors. The push toward autonomous and electric vehicles is driving significant demand for advanced semiconductor solutions. With a planned investment of around €20 billion ($22.15 billion) in the semiconductor sector, Germany is well-positioned to lead the charge in next-generation automotive technologies. This investment supports the country’s aim to foster growth in semiconductor innovation, particularly in 3D stacking technologies, which are crucial for enhancing the performance and efficiency of diesel engines and electric vehicles alike.

Segmentation Analysis

By component

Processor Segment Dominated the Market with the Largest Market Revenue.The processor segment plays a pivotal role in optimizing diesel engine performance, particularly in engine control units (ECUs). Multi-core processors are integral in heavy-duty vehicles, enabling real-time data processing for fuel efficiency, emissions control, and performance. These processors also support connectivity features for telematics, enhancing fleet management. As vehicle manufacturers adopt advanced ECUs to meet stringent emissions regulations, the demand for sophisticated processors is growing, making this segment critical for the future of diesel engine technology.

By vehicle type

Heavy Commercial Vehicles (HCVs) dominate the market due to their reliance on diesel’s high torque and fuel efficiency, which are vital for transporting heavy loads over long distances. In regions like North America and Europe, where logistics industries are well-established, HCV demand is significant. Furthermore, emerging markets in Asia-Pacific are increasingly adopting diesel engines in trucks and construction equipment, driven by rapid infrastructure development, further fueling the growth of HCVs in the global market.

By applications

The powertrain segment leads in the market, covering core functions like torque generation and energy conversion. Diesel engines are favored in industries such as agriculture and construction for their robustness and efficiency, especially in high-displacement engines used in tractors and excavators. These applications benefit from diesel engines' reliability and power, making them the preferred choice for tasks requiring sustained energy output in demanding environments, further solidifying the powertrain segment's dominance.

By propulsion type

ICE Segment Dominated the Market with the Largest Market Revenue. Despite the rise of electric propulsion, internal combustion engines (ICEs) remain dominant in the diesel market, particularly for long-haul transportation and industrial applications. Diesel ICEs are known for their efficiency and cost-effectiveness, providing high torque for heavy-duty operations. Advanced after-treatment systems, like SCR and EGR, have enabled these engines to comply with increasingly stringent emissions standards, maintaining their prominence in the market.

Company Market Share

The key players in the global market are fueling growth by forming strategic partnerships, investing heavily in research and development, and introducing innovative technologies to enhance connectivity solutions that align with emerging industrial and societal needs.

Mahindra Powerol: An Emerging Player in the Market

Mahindra Powerol, a subsidiary of Mahindra & Mahindra Ltd., is an emerging player in the market, making significant strides in the global automotive and industrial sectors. The company is known for its innovative, fuel-efficient, and low-emission diesel engines designed for diverse applications such as automotive, agriculture, construction, and power generation.

Mahindra Powerol focuses on compact and high-performance engines, leveraging advanced technologies like electronic fuel injection systems and after-treatment solutions to meet stringent emission standards. For example, its mCRD engines, tailored for agricultural equipment, offer higher torque with lower fuel consumption, catering to the rising demand for efficiency and sustainability.

Recent Developments

• January 2024 - Tata Motors launched its Turbotronn 2.0 diesel engine for trucks, aiming to enhance fuel efficiency and reliability for heavy-duty vehicles, especially in long-haul applications.
• March 2024 - Caterpillar Inc. unveiled the CAT C13D diesel engine, designed specifically for off-highway equipment. This engine focuses on delivering increased power density and improved fuel efficiency.

Analyst Opinion

As per our analysts, the global market is set for steady growth, fueled by robust demand across key industries, including construction, transportation, agriculture, and power generation. These sectors rely on diesel engines for their unmatched high-torque output, reliability, and durability. Among components, processors stand out as the dominant segment, driven by their integration into advanced engine control units (ECUs) that optimize fuel efficiency, emissions compliance, and performance in real time.

Moreover, heavy commercial vehicles (HCVs) lead the market in the vehicle type segment, as their reliance on diesel ensures efficiency for long-haul operations, particularly in logistics-centric regions. The powertrain application continues to thrive, with diesel engines playing a pivotal role in industries requiring high durability and effective energy conversion.

While internal combustion engines maintain their dominance, the market faces challenges from stringent emission regulations and competition from electric alternatives. Nevertheless, advancements in biofuels and renewable diesel integration highlight the industry's commitment to sustainability.