Transfer Case Market size is forecast to reach $24.82 billion by 2025, at a CAGR of 8.75% during 2020-2025. Increased popularity of AWD systems and four-wheel-drive, rising effort by automotive manufacturers to enhance fuel-efficiency, the growing need of low range gears and chain drive, and increased demand for electric and hybrid vehicles are expected to accelerate the transfer case market during the forecast period. In 2019, The U.S. Department of Transportation (DoT) and EPA proposed to amend the existing Corporate Average Fuel Economy (CAFE) standards to improve the safety and fuel economy of automobiles. This new amendment is likely to bring stricter regulation for automotive OEMs to minimize societal costs and reduce highway fatalities. Such regulations are likely to increase the demand for drivetrain electrification, thereby accelerating the demand for transfer case.
- Asia-Pacific dominates the Transfer Case industry owing to rising production of automobiles and stringent regulatory norm on reducing environmental footprints and energy consumption.
- Increasing demand for electric and hybrid vehicles and the ban on diesel and gasoline vehicles is expected to create favorable market for transfer case in passenger vehicle segment.
- Increasing adoption of sustainable and environment-friendly automotive components and implementation of stringent government regulations related to automobile emissions will increase the market demand for transfer case during forecast period.
- Sharp decline in the sales of passenger car production in United States and other developed market will hinder the growth of transfer case market.
Type - Segment Analysis
Electronics shift on the fly transfer case is likely to register faster growth due to rising deployment of advanced electrification technology in modern automobiles. The growing adoption of electric and hybrid vehicles and rising demand for safety and comfort in modern automobiles will be the key driving factors for electronics shift on the fly transfer case. With a 16-bit/ 32-bit CAN-enabled Electronic Control Unit (ECU), the electronics shift on the fly is considered to be an efficient mechanism is select between two-wheel-drive and four-wheel drive along with choosing various gear driven ranges. This technology also offer enhanced traction and stability as compared to its manual shift on the fly counter parts. The increased demand for luxury cars in developing countries such as India will create an opportunity for electronics shift on the fly transfer case. For instance BMW and Mercedes sold approximately 11,000 and 15,538 luxury cars in 2018 with an increase of Y-o-Y growth of approximately 13% and 2% respectively in India.
Application - Segment Analysis
Passenger vehicle is the largest segment for automotive transfer case market with a market share of approximately 55.58% in 2018. The passenger vehicle segment is also expected to grow at a CAGR of 9.35% during 2020-2025. The growing demand for luxury passenger cars, rising popularity of electric and hybrid passenger vehicles are the key driving factors for transfer case market. The sale of Electric Vehicle worldwide increased by 64% between 2017 and 2018 and reached approximately 2.1 million units in 2018. As per major auto manufacturers, approximately 8-10 new electric vehicle model is likely to be introduced during 2019 and 2020. Transfer case being widely used in electric and hybrid vehicle is likely to find enormous demand during this period.
Geography - Segment Analysis
In 2018, APAC dominated the transfer case market with a market share of more than 33.57%, followed by North America and Europe. The economy of APAC is majorly influenced by the major countries such as China and India. In these countries, the government are aggressively implementing regulatory framework to reduce the environmental footprint and fuel consumption in automobiles. According to new CAFE regulations introduced in India, the corporate average fuel consumption for each automaker are expected to be brought down to 113 CO2 gm/km by 2022 compared to the 129.8 CO2 gm/km in 2017. Stringent regulations as such will drive the usage of transfer case market in this region. Similarly, China is continuously creating opportunity for transfer case market with the increased sales of automobiles in this region. The annual production of BMW in China increased to 450,000 vehicle units from 144,274 vehicle units, since 2017 till date, from its house manufacturing plants. Along with the increase in the production, the company has also invested $1.14 billion for expanding its production line for its newer models. As per China's 13th Five-Year Plan, China has set target to reduce energy consumption per unit of GDP by approximately 15% between 2015 to 2020. This plan will enforce automobile manufacturers to implement new technology to achieve the same, thereby creating opportunity for transfer case market. In addition to the above pointers, U.S is also witnessing significant demand for transfer case from off high vehicles. For instance, in U.S, rock crawling vehicles sales have increased by 3.21% during 2017-2018.
Drivers –Transfer Case Market
- Growing demand for 6*2 axle configuration in heavy duty trucks and commercial vehicles
6×2 axle configuration in heavy duty trucks and other commercial vehicles are garnering new attention as the end users are looking for optimizing performance.
Trucks fitted with the new generation 6×2 axle configuration can carry the same amount of load with approximately 3%-4% lesser fuel consumption as compared to their 6×4 counterparts. Therefore, an increase in the sale of 6×2 commercial trucks will drive the demand for transfer cases which will fuel the automotive transfer case market during the forecast period. The medium-duty and heavy-duty trucks grew by 4.5% worldwide during 2017-18. The countries like India, Brazil and Indonesia witnessed double digit growth in sales during this time. Similarly, in Europe and China there is a strong regulatory pressure to lower down the emissions in Heavy duty and light trucks. This is likely to create new opportunity for truck with 6*2 axle configuration, thereby creating demand for transfer case market.
- Implementation of Stringent Environment and fuel efficiency Regulations
The demanding requirement from consumers and regulatory bodies are bringing disruption in the automotive industry, with new technological innovations. At present, the automotive industry is focusing on reducing the weight of vehicles, while achieving significant fuel efficiency and reducing emission. In recent time, with these emerging requirement, transfer case have become a vital component in the automobile industry. In 2018, Magna introduced a 48V, 4 wheel drive shafts system transfer case which reduce CO2 emission by 10% and offer better fuel efficiency as compared to 2 Wheel drive system. Similarly, in recent time, Corporate Average Fuel Efficiency/Economy (CAFE) regulations are followed strictly by many developing countries including India. These regulations are aiming at improving fuel efficiency of vehicles and lowering down CO2 emissions. So, most of the manufacturers are deploying technology like advanced transfer cases in automobiles to achieve the same.
Challenges – Transfer Case Market
- Sharp Drop In the sales of passenger car production:
The production of passenger cars are witnessing sluggish growth since 2016 owing to economy slow down and various government financial reformation activities worldwide. For instance, the rise in the Federal Reserve Interest rate has slowed down the sales of vehicles in the U.S. Since 2016. The production has also been declining during this period. From 2016 to 2018, the production of passenger cars have been decreased by approximately 40%. In 2017, Ford reported new vehicle sales down by approximately 1%-1.2%. GM reported a sales down by 0.9%-1.2%, while Fiat Chrysler sales were down by 7%-8.5% during 2016-2017. This could create a possibility of contraction of automotive market in the U.S., which will negatively affect the automotive transfer case market growth.
Transfer case top companies include AISIN SEIKI, American Axle & Manufacturing, BorgWarner, Magna International, and ZF Friedrichshafen. In 2018, transfer case market share was consolidated with the top five players accounting for more than 65%. Product differentiation is the key strategy adopted by most of the companies in this market. Thus, several players are investing largely on research and development to produce technologically advanced products.
- In February 2019, BorgWarner formed a new entity called Cascadia Motion to acquire assets and merge the operations of the companies AM Racing and Rinehart Motion Systems. This new entity will now focus on electric and hybrid propulsion for emerging applications.
- In June 2018, Magna Expanded its electric products portfolio with advanced 48 Volt Transfer Case.
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