Automotive Sensors Market: A Brief Overview
Over the past few decades, the global automotive sector has been seen undergoing a continuous process of evolution. This evolution has been in every aspect of this sector stretching from automotive performance to automotive design. Industry players have been funnelling huge investments into research and development in order to keep their innovation engine running and develop better performance and better design-vehicles. The result of these innovations is not only enhanced comfort and safety as compared to earlier designs, but also improving profit margins for automakers. This evolution is changing the way people see passenger cars and commercial vehicles, both light and heavy. For a fairly long period of time, people sought vehicles with good fuel economy and some required features, and which fit well into people’s budget. However, this approach of people to find a good vehicle is losing traction. People, now, look for vehicles which offer a high degree of automation, which adds to the overall safety of the passengers, and high degree of comfort.
The automotive sensors market growth is tightly tied to the growth of automotive industry which has somewhat flattened over the past couple of years. Although revenues for automakers from vehicle sales are witnessing a continuous decline in many countries worldwide, the automotive sensors market still continues to have a fairly strong hold in the landscape. According to the information from the International Organization of Motor Vehicle Manufacturers (OICA), sales of vehicles slipped for two consecutive years in 2018 and 2019. A consecutive decline like this was witnessed when the global recession kicked in in 2007. The recession squeezed the liquidity out of the market and severely impacted people’s spending capacity which led to a drop in sales of vehicles. The automotive sector is witnessing another downturn now and the onset can be market to the year 2018. The trend is clear from the figure given below:
Global Automotive Sales, 2006 to 2019
Source: International Organization of Motor Vehicle Manufacturers
When the big recession started about a decade ago, a blow to spending power of people led to a continuous drop in automotive sales in 2008 and 2009. However, this time, this downturn in worldwide vehicle sales is not because of inability of customers to pay for them, but because there is already a fairly high penetration of vehicles in many countries. North America and Europe, which have some of the most developed economies in the world, have been witnessing a huge impact of this factor. Since disposable income of people in developed economies across these regions is high, their standard of living is also high. With many households already having at least one vehicle, the demand for new vehicles among them is declining. But, this is not as bad as it looks like, since the broader picture shows some benefits of presence of a large number of vehicles on road on the growth of automotive industry. Although automotive sensors are designed in a way that allows them to withstand harsh environmental conditions, the number of vehicles being taken to workshops for sensor replacement is increasing. Parking sensors, for instance, need replacement in the event of the vehicle suffering a collision from the side sensors are installed on. Since all the sensors in the array are configured in a way that malfunctioning of one might hinder the performance of the other, replacement of these sensors often involves replacement of the complete array. As internet penetration continues to increase, and businesses continue to expand to online channels, growth of companies which offer vehicle maintenance on demand is becoming robust. Rapid growth of this market, on account of lucrative offers by vendors, is increasing the number of vehicle repairs performed each year. This is boosting the demand for automotive parts, thus contributing to the growth of automotive sensors market.
However, continuously declining automotive production in many regions across the globe has been hindering the growth of this market. The global production of vehicles declined in two years in a row. The decline in vehicle production in years 2018 and 2019 was the first of its kind in this decade. The figure given below shows a data from the International Organization of Motor Vehicle Manufacturers, which shows the trend:
Global Automotive Production, 2011 to 2019
Source: International Organization of Motor Vehicle Manufacturers
While this decline was caused by shrinking automotive sales in many countries, the COVID-19 pandemic in 2020 has given another hit to the automotive sector. Disruptions in local and global supply chains, due to nationwide lockdowns in many parts of the world and closing of borders by many countries, have brought many manufacturing facilities to a temporarily halt. Declining production of vehicles is shrinking with it the demand for automotive sensors, thus restraining the market growth. Yet, increasing flow of investments into electric and hybrid vehicles in many parts of the world is expected to fuel the market growth to some extent. Players across many countries are seeking to tap the potential these new markets hold. According to a data from the German Association of the Automotive Industry (VDA), automotive industry in Germany accounts for more than one-third of total spending in R&D in automotive sector globally. This industry in Germany employs more than one-fourth of the total R&D workforce in Germany. With around one-third of all patents for electric mobility and hybrid drives filed worldwide coming from Germany, and increasing number of trials of self-driven cars being conducted, German automakers are expected to bring a good number of advanced mobility options on road over the next few years. As many other countries like China, Japan, South Korea, India, the United States, Spain and Italy among others are showing a continuous growth in this new landscape, the market for automotive sensors seems promising over the next five years.
About the Author:
Dhiraj Kumar Sharma is a Market Research Analyst at Knowledge Sourcing Intelligence. He combines his outright understanding of technologies with years of experience working in the industry to deliver actionable information to clients who span across industries and geographies. Dhiraj often works closely with clients in order to better understand their requirements and is known for the quality of market insights he delivers to them.
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