The global automotive differential market is expected to expand at a CAGR of 5.9 percent from 202`to 2027. It is expected to grow from a market size of USD 18.8 billion in 2020 to USD 26.2 billion by 2027. The demand for improved road traction and fuel efficiency are two major factors driving the growth of the automotive differential industry. With a vehicle demand, the automotive differential market has a lot of room for development. A major driver for the differential market is the increasing demand for all-wheel-drive vehicles.

Since the outer wheels must occupy a greater diameter, the automotive differential assists in smooth operations by assisting the wheels to revolve at different speeds. It is a component of the rear axle assembly of rear-wheel drives, consisting of rear drive axles and rear axle housing, which splits or allows the power produced to move the wheels independently.

During the forecast period, Asia Pacific is projected to account for the largest market share. China and Japan, for example, are major vehicle manufacturing centres in the area. The demand for automotive differential is expected to rise significantly as vehicle output increases. Off-road vehicles and sports cars have also grown in popularity in Asian countries, thanks to an increasing preference for all-wheel and four-wheel drive integrated vehicles. During the forecast period, these factors are likely to contribute to overall market growth. However, due to the high volume of vehicles produced in the area, the overall demand for differential is the highest.

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COVID-19 has caused a drop in vehicle demand, which has a negative impact on the overall automotive differential market. However, the automotive differential market is expected to expand in the coming years due to a projected steady recovery in vehicle production by Q1-Q2 of 2021. China and Japan, for example, are major vehicle manufacturing centres in the area. The demand for automotive differential is expected to rise significantly as vehicle output increases. Off-road vehicles and sports cars have also grown in popularity in Asian countries, thanks to an increasing preference for all-wheel and four-wheel drive integrated vehicles. During the forecast period, these factors are likely to contribute to overall market growth. However, due to the high volume of vehicles produced in the area, the overall demand for differential is the highest.

The global automotive differential market is expected to be driven by factors such as rising demand for commercial vehicles and growing penetration of AWD and 4WD vehicles. However, declining automotive production and sales over the last two years, as well as an increase in production of vehicles with in-wheel electric motors, are expected to limit demand growth over the forecast period. Furthermore, winning contracts/agreements is a key strategy for gaining a competitive edge, and electronically limited-slip differential output is expected to complement the global automotive differential market development. As a result, these trends are projected to improve the market's growth prospects in the near future.

OEMs use vehicle differential assemblies extensively and often in their manufacturing processes. Open contracts and agreements between OEMs and manufacturers of automotive differential assemblies are seen in this product procurement. These contracts detail the collection of conditions that must be met within the specified timeline. To achieve a competitive edge and maintain long-term market prospects, manufacturers must concentrate on winning contracts and deals with new installations.

The growing demand for electric buses and trucks, as well as increased knowledge about electric vehicles, may stymie the automotive differential market in the forecast period. The automotive differential market faces a challenge in developing and delivering electronics that ensure safety.

The COVID-19 crisis is causing instability in the automotive differential industry by slowing supply chains, stifling business growth, generating unpredictable demand scenarios, and growing consumer fear. The selling of automotive differentials is inextricably linked to the manufacture and sale of automobiles all over the world. If the country-by-country blockade is prolonged, production loss is expected to rise. In the third quarter of 2020, global automotive production fell by 22.3 percent compared to the third quarter of 2019. Furthermore, global light vehicle sales fell by nearly 20% year over year, from 6,335 thousand in February 2019 to 5,077 thousand in February 2020.