Auto sales continue to boom around the world with the increasing purchasing power of people. While automobiles fulfill the practical purpose of transportation for most people, for some, they act like a show of their socioeconomic status, especially in developing countries, where cars, despite the consistent economic growth in the last 4–5 decades, are still considered a symbol of luxury. Hence, since the relative normalization of the situation during the ongoing COVID-19 pandemic from 2020, car sales are picking up again.
This is why P&S Intelligence expects the automotive differential market value to increase considerably from about $20 billion in 2020. The differential is one of the key components of the drivetrain system of all kinds of four-wheelers: front-wheel-drive, rear-wheel-drive, and all-wheel-drive (AWD)/four-wheel-drive (4WD), transferring the power from the engine to the wheels. In front-wheel drives, it allows the two front wheels to rotate at different speeds when the vehicle turns. In rear-wheel drives, it feeds mechanical power from the engine to the rear wheels. In 4WDs, the differential fulfills both these purposes.
Differentials are majorly procured for the manufacturing of passenger cars as they are produced in higher numbers than commercial vehicles. Car sales are booming around the world with the increasing disposable of people and the former’s declining prices. Developing countries, including India, South Korea, and China, account for the majority of the global auto production. This has led to their lower costs here than in other parts of the world, which, combined with their huge customer base, has been driving car sales.
This is also why Asia-Pacific (APAC) will continue being the largest automotive differential market in the coming years. In 2020, almost 47% of the worldwide auto production was attributed to Japan, China, and South Korea, reaching 36 million units combined. Of these, most were passenger cars; however, the demand for buses and trucks is rising in the region as well. Due to the growing urban population, the surging demand for mass rapid transit is driving bus sales. Similarly, the expanding trade and logistics sector is propelling the demand for trucks.
Hence, as vehicle sales skyrocket, so will the integration rate of automotive differentials.