Automotive Differential Market Size, Share, and Trends 2024 to 2034

Automotive Differential Market Size and Forecast 2024 to 2034

The global automotive differential market size is calculated at USD 24.79 billion in 2024 and is projected to surpass around USD 38.53 billion by 2034, expanding at a CAGR of 4.51% from 2024 to 2034. The rising development related to torque-vectoring in automobiles across the world is driving the growth of the automotive differential market.

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Automotive Differential Market Key Takeaways

• Asia Pacific led the automotive differential market and contributed the biggest market share of 36% in 2023.
• North America is expected to attain the fastest rate of growth rate in the market during the forecast period.
• By drive type, the front wheel drive (FWD) segment held the largest share of the market in 2023.
• By drive type, the rear wheel drive (RWD) segment is estimated to exhibit the fastest growth in the market during the forecast period.
• By vehicle type, the passenger car segment dominated the market in 2023.
• By vehicle type, the commercial vehicle segment is expected to grow at the fastest growth rate in the market during the forecast period.
• By type, the open segment held the largest share of the market in 2023.
• By type, the locking segment is expected to grow with the highest CAGR in the market during the forecast period.

Asia Pacific Automotive Differential Market Size and Growth 2024 to 2034

The Asia Pacific automotive differential market size is exhibited at USD 8.92 billion in 2024 and is projected to be worth around USD 14.06 billion by 2034, growing at a CAGR of 4.63% from 2024 to 2034.

Asia Pacific led the automotive differential market in 2023. The presence of several local market players in automotive differential, such as Hyundai WIA Corporation, JTEKT Corporation, Honda, and some others, are constantly engaged in the development of high-quality differential for automotive and adopting several strategies such as partnerships, acquisitions, launches, and business expansions, which in turn drives the growth of the automotive differential market in this region. Also, the growth of the market in this region can be attributed to the rising advancements in the automotive sector, along with growing investment by governments in countries such as India, China, Japan, South Korea, and others for developing the automotive industry.

• According to a report by Invest India, the government of India has announced to invest around USD 3.5 billion for developing automotive technology across India during FY 2023-24.
• In February 2023, JTEKT Corporation launched JTEKT Ultra Compact Diff. JTEKT Ultra Compact Diff. is a new automotive differential that is used in battery electric vehicles (BEVs).

North America is expected to attain the fastest growth rate in the automotive differential market during the forecast period. The rising investments in the automotive sector by private and public entities, along with growing advancements in the electric vehicle sector in countries such as Canada and the U.S., are expected to drive market growth to some extent. The increasing demand for luxury vehicles due to changing lifestyles, along with the growing use of commercial vehicles for transportation and commute purposes, is likely to drive the market growth to some extent. Furthermore, the presence of various local companies of automotive differentials, such as Melrose Industries Plc, American Axle & Manufacturing Inc., BorgWarner Inc., and some others, are developing advanced automotive across North America, which in turn is expected to drive the growth of the automotive differential market in this region.

• In May 2024, the U.S. government announced that it would invest around 1.3 billion USD in developing EV infrastructure across the country.
• In May 2024, BorgWarner launched a new electric Torque Vectoring and Disconnect (LVD) system used in various battery electric vehicles (BEVs). This system will be used to increase stability, provide superior dynamic performance, traction control, and others to intelligently control the torque of the wheels.

Market Overview

The automotive differential industry is one of the most important industries in the automotive sector. This industry deals with the manufacturing and distribution of superior-grade differentials for automobiles across the world. The automotive differential market is driven by the growing developments in the automotive industry along with research and development activities for developing automotive differentials. This industry comprises various types of drive systems, such as front-wheel drive (FWD), rear-wheel drive (RWD), and all-wheel drive (AWD). The automotive differential is used in various vehicles, such as passenger cars, commercial vehicles, and electric vehicles. There are several types of differential systems, including Open, Locking, LSD, ELSD, and Torque vectoring. This industry is expected to grow significantly with the developments in the automotive industry.

• In March 2024, Sona Comstar announced that the company had manufactured around 400 million differential gears and 6 million differential assemblies in the last year (2023).

How is AI Changing the Automotive Industry?

Artificial Intelligence plays an important role in the development of the automotive industry. Nowadays, most automotive companies have started adopting AI technology in the manufacturing and designing of several components that are used in cars. AI can help in the production of various kinds of differentials in factories by automating manufacturing processes, enhancing quality control, and optimizing supply chains.

Additionally, automotive OEMs have started investing in AI to enhance the manufacturing of various car components, including differential and drivetrains. Thus, the rising integration of AI in the automotive industry is likely to change the demography of the automotive differential market.

• In August 2023, Mercedes-Benz announced an investment of more than USD 2.2 billion in the integration of AI in their manufacturing facility and upskilling the workers to increase efficiency in the manufacturing process.

Automotive Differential Market Growth Factors

• The growing developments related to the automotive industry have led to the automotive differential market growth.
• There is a rise in the number of government initiatives related to EV sectors across the globe.
• Rising adoption of hybrid vehicles (HEV) around the world.
• There are growing investments from public and private sector entities to develop the automotive differential market.
• Advancements in technologies related to the automotive industry positively impact industrial growth.
• The increasing sales of commercial vehicles across the world have accelerated the automotive differential market in a positive way.
• The growing application of differential for improving performance and stability in vehicles.
• The research activities associated with the development of all-wheel drive (AWD).
• The rising trend of low-cost EVs across the Asia-Pacific region boosts market growth.
• The growing demand for advanced drivetrain has driven the growth of the automotive differential market.

Market Scope

Market Dynamics

Driver

Increasing demand for EVs across the world

Many popular electric vehicle brands, such as GM-Wuling Automobile, Hyundai Motor Company, SAIC-Tesla, BYD, Tata Motors, and others, are introducing new vehicles with advanced features. This is driving up the demand for differentials and boosting the automotive differential market. The shift to EVs is fueled by reasons like lower emissions, reduced maintenance, greater efficiency, financial benefits, and more. The global trend towards electric cars is rapidly increasing, thanks to advancements in the automotive industry. As electric vehicle sales grow worldwide, the demand for differentials from EV companies is also rising quickly, leading to overall market growth.

• In May 2023, Sona Comstar announced the opening of a new manufacturing facility in Pune, India. This manufacturing plant will manufacture driveline products such as differential and drivetrains for electric vehicles (EVs).
• In May 2024, BYD launched a new PHEV in China. This new car is named ‘Qin L DM-I,’ and these PHEVs are equipped with BYD’s new fifth-generation DM system that provides a claimed driving range of around 2100 km.

Restraint

High maintenance cost and the presence of alternatives

The automotive differential industry has gained prominent attention due to the rising sales of vehicles around the world. Although there are several differential applications in the automotive sector, certain problems exist in this industry. Firstly, the maintenance cost of automotive differentials is growing rapidly due to the rising prices of raw materials associated with it. Secondly, the advancements in electric motors that have the ability to drive the wheel in vehicles have been growing rapidly. Thus, the increasing cost of maintenance, along with the availability of alternatives, is expected to restrain the growth of the automotive differential market during the forecast period.

Opportunity

Developments related to hydrogen cars

Various developments have been taking place in the automotive industry in recent times. Automotive companies have started developing new vehicles that can use hydrogen as a fuel for driving. Hydrogen cars are also known as fuel cell electric vehicles and are capable of producing electricity by using hydrogen to drive the vehicles. Thus, the ongoing advancements associated with hydrogen vehicles are expected to create ample growth opportunities for the players in the automotive differential market.

• In February 2024, Honda unveiled the new CR-V. CR-V is a sports utility vehicle that will run using hydrogen fuel cell technology.

Drive Type Insights

The front wheel drive (FWD) segment held the largest share of the automotive differential market in 2023. The rising demand for passenger cars around the world boosts the market growth. Also, the application of front-wheel drive in vehicles has increased as it offers superior traction on snowy and wet roads, which in turn drives the market growth. Moreover, the rising demand for front wheel drive vehicles due to high fuel efficiency and better ride quality is expected to propel the growth of the automotive differential market during the forecast period.

• In May 2024, Maruti Suzuki launched the all-new Swift in India. This car comes with front-wheel drive capability and provides a mileage of around 25 km.

The rear wheel drive (RWD) segment is estimated to exhibit the fastest growth in the automotive differential market during the forecast period. Rear-wheel drive cars are much more affordable and require less maintenance than all-wheel drive cars and front-wheel drive cars, which, in turn, drive market growth to some extent. The rising use of rear-wheel drive in vehicles due to factors such as high traction control, acceleration-handling balance, and others has boosted market growth. Moreover, automotive manufacturers are launching rear-wheel drive cars at pocket-friendly prices, which in turn drives the growth of the automotive differential market.

• In January 2023, Mahindra announced the launch of the all-new RWD Thar in India. This car is available in diesel-manual and petrol-automatic variants. The petrol variant comes with a 2.0-litre turbo-petrol engine that produces a maximum power of 150 bhp, and the diesel variant comes with a 1.5-litre diesel engine that produces a maximum power of 117 bhp.

Vehicle Type Insights

The passenger car segment dominated the automotive differential market in 2023. The growing demand for luxurious sedans and hatchbacks across the world has increased the demand for differentials, thereby driving the market growth. Moreover, the growing demand for hybrid vehicles, along with the rising trend of compact SUVs among people, has boosted the market growth. Additionally, the increasing sales and manufacturing of passenger vehicles around the world are expected to drive the growth of the automotive differential market during the forecast period.

• According to the report of the International Organization of Motor Vehicle Manufacturers, the total number of passenger cars manufactured in Germany and China was 4109371 and 26123757, respectively, in 2023.
• In June 2024, Schaeffler launched a planetary gear system. The planetary gear system is designed for hybrid vehicles to provide improved mileage and reduction in emissions.

The commercial vehicle segment is expected to grow at the fastest growth rate in the automotive differential market during the forecast period. The rising demand for trucks to carry goods from one place to another has increased the demand for differential and drivetrains, thereby driving market growth. Moreover, the rising emphasis on manufacturing commercial vehicles for passenger commute purposes across the world is driving market growth to some extent. Additionally, the growing developments in buses for long commutes, along with increasing demand for mini trucks for logistics purposes, are likely to drive the growth of the automotive differential market during the forecast period.

• According to a report from the International Organization of Motor Vehicle Manufacturers, the total number of commercial vehicles manufactured in Canada and China was 1176138 and 4037209, respectively, in 2023.
• In September 2023, Switch Mobility launched new light commercial vehicles in India. These vehicles are named Switch IeV3 and Switch IeV4. The Switch IeV3 comes with a 25.6 kWh LFP battery that produces a peak power of 40 kW and provides a payload capacity of 1200 kgs. The Switch IeV4 comes with a 32.2 kWh LFP battery that produces a peak power of 60 kW to provide a payload capacity of 1700 kgs.

Type Insights

The open segment held the largest share of the automotive differential market in 2023. The rising sales of passenger vehicles around the world are driving the market growth. Moreover, the application of an open locking system to provide smooth movement of vehicles is likely to boost market growth. Additionally, the demand for luxury cars has increased due to superior drivability and performance that, increasing the demand for open locking systems, thereby driving the growth of the automotive differential market during the forecast period.

• According to the Society of Indian Automobile Manufacturers, the total passenger vehicle sales in India during 2022-23 was 38,90,114 units, which is an increase of around 25% from the previous year.
• In May 2024, Mercedes Benz launched the Maybach GLS 600 facelift and the Mercedes AMG S63 E in India. These vehicles are equipped with superior features such as Automatic Climate Control, Multi-function Steering Wheel, ADAS, Ventilated Seats, and 9-speed automatic gear transmission.

The locking segment is expected to grow with the highest CAGR in the automotive differential market during the forecast period. The rising demand for commercial cars around the world has increased the demand for locking differentials, thereby driving market growth. Moreover, the growing use of locking differentials to rotate the vehicle wheels at the same speed for a longer time period is likely to boost the market growth. Additionally, the rising demand for SUVs for off-roading purposes is expected to drive the growth of the automotive differential market during the forecast period.

• In March 2024, Nissan launched a Kicks SUV. This SUV comes with ADAS and ProPILOT assist system for maximum safety coupled with touch-sensitive controls for the HVAC, a wireless charging pad, four USB-C ports, wireless Apple CarPlay and Android Auto connectivity, headrest-mounted BOSE speakers along with panoramic sunroof.
• According to the Society of Indian Automobile Manufacturers, total commercial vehicle sales during 2022-23 in India was 9,62,468 units, which is an increase of around 28% from the previous year.

Automotive Differential Market Companies

• American Axle & Manufacturing Inc.
• BorgWarner Inc.
• Dana Incorporated
• Eaton
• Hyundai WIA Corporation
• JTEKT Corporation
• Linamar Corporation
• Melrose Industries Plc
• Schaeffler Group
• ZF Friedrichshafen AG

Recent Developments

• In May 2024, Lamborghini launched a new electric torque vectoring system. This new system supports the fast response to driving the two axles in Lamborghini cars.
• In March 2024, Fastmarkets launched a low-carbon-aluminium differential. This new differential is launched due to the rising demand for sustainable materials in the automotive industry in Japan and South Korea.
• In December 2023, SPELAB launched a new differential cover. SPELAB's differential cover is manufactured from high-quality billet aluminum alloy that offers enhanced durability and performance as compared to other conventional iron counterparts.
• In June 2023, TDK Corporation launched TCM0403T. TCM0403T is a new series of noise reduction filters for interface differential transmission.

Segments Covered in the Report

By Drive Type

• Front-Wheel Drive (FWD)
• Rear-Wheel Drive (RWD)
• All-Wheel Drive (AWD)

By Vehicle Type

• Passenger Car
• Commercial Vehicle
• Electric Vehicle

By Type

• Open
• Locking
• LSD
• ELSD
• Torque Vectoring

By Geography

• North America
• Asia Pacific
• Europe
• Latin America
• Middle East & Africa