Differential Assembly Market

Market Overview

The global differential assembly market size was valued at USD 23.95 billion in 2021. It is expected to reach USD 30.99 billion by 2030, growing at a CAGR of 3.0% during the forecast period (2022–2030).

The differential assembly is an essential component of the drivetrain in an automobile, and its primary function is to ensure that the RPMs of any two connected wheels are kept proportional to one another. Regardless of where it is located, it is an essential vehicle component. Its purpose is to enable the wheels to move at varying speeds.

The production of automobiles in different regions of the world drives the demand for differential assemblies. It is fueled that the growth of the all-wheel-drive (AWD) and four-wheel drive (4WD) vehicle markets will support the expansion of the differential assembly market. The original equipment and differential assembly manufacturers enter into long-term contracts and agreements to conduct business regarding the procurement of differential assemblies.

Market Dynamics

Differential Assembly Market Driving Factors

Use of Fuel-Efficient Vehicles and More Stringent Performance Standards to Aid Growth

The automotive industry has seen a significant change in the front of the technological evolution, as most automobiles are installed with high-end electrical and electronics technology-driven systems. Original equipment manufacturers (OEMs) use electrical and electronic components because of their high output efficiency and significant weight reduction of the corresponding component, resulting in a fuel-efficient solution. In addition, vehicle emissions are a significant factor because they are a source of harmful greenhouse gases that affect the environment over the long term. There is a concerted effort being made by governments worldwide to establish uniform emission standards for motor vehicles to bring the level of greenhouse gas emissions under control and maintain a healthy environment. In addition, end consumers and drivers demand technologically advanced electrical components and systems for increased ease and comfort during the driving experience.

Rising Number of Vehicles Equipped with (AWD) and (4WD) and Commercial Vehicles to Drive Market

Drivetrains, powertrains, safety, and vehicle stability have all seen technological advancements in automotive manufacturing to increase vehicle operational efficiency. The buyers of automobiles demand that their vehicles have higher output efficiency and optimal performance in high-end driving operations. In addition, the demand outlook from end-users has moved more toward an increased emphasis on luxury, comfort, and driving dynamics. The evolving demand of end consumers is increasing interest in four-wheel drive and all-drive-wheel vehicles to achieve the desired levels of vehicle safety and dynamics.

In addition, Original Equipment Manufacturers, also known as OEMs, are encouraged to adopt these drive systems to satisfy end-users ever-evolving demands. In recent years, sales of all-wheel drive and four-wheel drive vehicles have seen significant increases, and this upward trend is expected to continue in the years to come. These drive systems require two or three differential assemblies to perform their driving duties. Therefore, the market share of all-wheel drive (AWD) and four-wheel drive (4WD) vehicles is anticipated to drive demand for differentials and bevel gear in the distant future.

It is assumed that the increase in demand for commercial vehicles in developing nations will exhibit remarkable growth in the coming years due to urbanization and increased industrial production. The commercial vehicle segment of the Indian automotive industry experienced an exceptionally high growth rate. High-performance differential assembly components are required to drive commercial vehicles, which are almost always rear-wheel drive.

Differential Assembly Market Restraining Factors

Significant Increase in In-Wheel Electric Motor-Powered Vehicles to Hinder Market Growth

Some electric vehicles have wheels-mounted electric motors that power the wheels directly. These motors can deliver torque independently and directly to the wheels, eliminating the need for a differential. In addition, GEM Motors, one of the companies that manufacture electric mobility, is concentrating on developing GEM in-wheel electric motors for potential customers in Switzerland, France, Sweden, Germany, and Italy. Also, there has been a substantial rise in the demand and production of electric vehicles in recent years. Components that do not require replacement, such as fan belts, oil, air filters, head gaskets, timing belts, cylinder heads, and spark plugs, make combustion engine-powered automobiles more cost-effective and fuel-efficient. As a result, increased production of vehicles with electric motors integrated into the wheels impedes the expansion of the automotive differential market.

Differential Assembly Market Opportunities

Production of Electronic Limited-Slip Differentials to Spur Market Opportunities

A vehicle equipped with an electronic limited-slip differential has increased traction, which is beneficial whether the road is dry or wet. It also improves the vehicle's handling, making it more suitable for high-performance automobiles. This differential provides essential benefits, including improved control and handling, enhanced performance, and traction in slippery conditions. Automobile manufacturers at the forefront of innovation are concentrating on creating electronic limited-slip differentials. For example, Eaton recently introduced a new generation of electronic limited-slip differential, which functions as a rapid-response traction management system.

Additionally, ZF has introduced a new networked electronic limited-slip differential (ELSD) rear axle transmission. This transmission type is typically intended for use in sports and off-road vehicles. The vehicle's braking system and this new differential are interconnected, enhancing its comfort, stability, and driving dynamics whether driven on or off-road. As a result, automotive manufacturers' production of electronic limited-slip differentials is anticipated to provide a remarkable growth opportunity for the companies currently active in the market for automotive differentials.

Segmental Analysis

The global differential assembly market is segmented by vehicle type.

By Vehicle Type

Based on vehicle type, the global differential assembly market is segmented into passenger cars, light commercial vehicles, heavy commercial vehicles, and tractors.

The passenger car segment is the highest contributor to the market and is estimated to reach USD 23.59 billion by 2030, growing at a CAGR of 3.6% during the forecast period. The sales of differential assemblies are directly influenced by global automotive production. Contracts and agreements between the original equipment and differential assembly manufacturers govern these transactions. Increased penetration of AWD and 4WD vehicles are anticipated to contribute to the market's growth for differential assemblies.

Recent Developments

• May 2022- BorgWarner provided eMotors for the Leading EV Brand in China. BorgWarner, a global leader in providing innovative and sustainable mobility solutions for the vehicle market, has been chosen to supply high-voltage hairpin (HVH) eMotors for China's leading electric vehicle manufacturer.
• May 2022- Dana and Lion Electric Co. Announced a Long-term Agreement for Electrified Systems. Dana Incorporated (NYSE: DAN) announced that it had confirmed its strategic supply relationship with current OEM partner Lion Electric Co. to support its line-up of electric buses and medium- and heavy-duty trucks.
• April 2022- Rolls-Royce and Schaeffler enter a 12-year partnership. Schaeffler will provide Rolls-Royce with the most advanced production technologies and manufacturing processes over the long term.