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The global limited slip differential market size was valued at USD 3.39 billion in 2021. The market is projected to grow from USD 3.58 billion in 2022 to USD 7.58 billion by 2029, exhibiting a CAGR of 11.3% during the forecast period. The global COVID-19 pandemic has been unprecedented and staggering, with experiencing lower-than-anticipated demand across all regions compared to pre-pandemic levels. Based on our analysis, the global market exhibited a decline of -3.7% in 2020 as compared to 2019.
LSD, is a part of an automotive drive system. It is similar to open differential. However, it utilizes an integrated clutch system instead of using powered pinion gear. The clutch mechanism locks the right and left sides of the axle when the wheel loses traction. This design is highly preferred for high-performance vehicles such as vehicles used for drag racing, commercial vehicles, and vehicles utilized to tow heavy loads.
LSDs are designed to assist the engine in efficiently utilizing its power on the road to enhance the vehicle's performance and handling experience. Therefore, increasing demand for efficient automotive performance and enhanced vehicle handling experience is likely to fuel the demand for LSDs in the near future. In addition, an increasing number of road safety concerns are also expected to boost their adoption, as it improves safety by enhancing the control driver has over the vehicle.
Pandemic Induced Lockdown Measures Caused LSD Demand Disruptions
The COVID-19 pandemic-induced lockdown in 2020 led to a severe downturn in vehicle production as factories were forced to close down or operate at reduced capacity after production resumed at the end of Q2 2020. Lockdown measures caused a halt in production and demand disruptions to automakers and auto parts manufacturers. Moreover, restrictions were lifted across different sectors and economies at a different pace, which resulted in input shortages in the automotive sector's complex value chains. Therefore, the negative impact of COVID-19 on automotive sales and production also created an adverse impact on this market. However, the market is likely to rebound post-pandemic due to the removal of restrictions and automotive sales returning to the pre-pandemic level.
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Increasing Penetration of Electronic Limited Slip Differential to Drive Market Growth
Increasing development and adoption of electronic LSD in premium and high-performance automobiles is one of the ongoing trends in the market. Electronic limited slip differential, also known as e-LSD, offers higher torque capacity and greater control compared to conventional LSD. Therefore, inclining manufacturers' preference to equip their advanced automobiles with e-LSD is expected to fuel the growth of the market during the forecast period.
Several manufacturers are investing heavily in the R&D of electronic LSD. For instance, ZF developed an e-LSD with a chipset in the ECU that allows vehicle software upgradation via the cloud, with cyber-security standards protecting the update process. The e-LSD is fully networked with the vehicle braking system, offering benefits to both off-road and on-road driving comfort, stability, and dynamics. Additional interfaces, such as the CAN with flexible data rate (CAN FD), allow for a connection between ZF's Integrated Brake Control system (IBC) and the e-LSD, allowing for close interaction between drive and brakes.
Moreover, Drexler Automotive and American Axle & Manufacturing, Inc. entered into a strategic partnership in 2018 to expand their relationship and offer top-class differential technologies from the superior market to the general market of light trucks, crossovers, passenger cars, and SUVs. Drexler and American Axle's expanded partnership integrated electro-mechanical LSDs into the AAM TracRite differential product family.
Similarly, in 2020, Eaton also developed electronically controlled, variable bias, hydraulically actuated LSDs for optimized vehicle performance at any speed and traction condition. Hence, increasing the availability of e-LSDs from key manufacturers will positively influence the growth of the market.
Growing Preference for Luxury SUVs and Premium Vehicles to Boost Market Growth
Growing preference and adoption of SUVs across developed and emerging economies such as India is likely to boost the market growth in years to come. Additionally, the increasing adoption of luxury and premium vehicles as a result of growing disposable income and consumer attraction toward premium automobiles are also anticipated to propel the demand for LSDs worldwide.
Increasing Demand for Road Safety to Fuel Market Growth
LSDs improve the control of a driver over a vehicle. Therefore, their increasing demand for high-performance vehicles for enhanced safety is likely to drive the market growth over the forecast period. While driving on sharp turns and corners when the road is icy or wet, open differentials may cause the car to spin out of control. Limited slip differential in snow assists in reducing tire slippage and performs better compared to open differential. Therefore, LSD can help the driver quickly get the vehicle under control resulting in improved road safety.
High Maintenance Requirement of LSD may Restrain Market Growth
Limited slip differential consists of clutch plates that may get worn out. Additionally, the cost of oil replacement further increases the overall maintenance cost of LSD. Therefore, the maintenance cost is higher than open differentials, which may restrain the market growth.
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Increasing Adoption of E-LSD to Drive Segment Growth
Based on type, the market is segmented into mechanical and electronic LSD.
The mechanical segment held the largest limited slip differential market share of 58.8% in 2021 and is expected to continue its dominance over the forecast period. Mechanical LSDs are the most common type of LSDs due to their wide range of applications, mainly in luxury and high-performance vehicles. For instance, automakers such as BMW, Subaru, Ford, and others already utilize mechanical LSDs in their high-performance automobiles. However, mechanical LSD requires high maintenance compared to electronic LSD.
The electronic segment is expected to witness the fastest CAGR over the estimated period. They offer superior performance compared to mechanical LSDs. Therefore, inclining customer and automakers' preference to adopt E-LSD is likely to boost the market growth in the near future. Moreover, various manufacturers are investing heavily in the R&D of electronic LSD to improve their key offerings and cater to the increasing demand among customers. For instance, manufacturers such as ZF, American Axle & Manufacturing, Inc., Eaton, and others have already taken the initiative to develop E-LSD.
Surge in Demand for Luxury SUVs to Drive Segment Growth
Based on application type, the market is segmented into SUV & pickup trucks and sedan & hatchback.
The SUV & pickup trucks segment dominated the market in 2021, with the largest market share and is expected to register the fastest growth rate over the forecast period. The growing trend for the adoption of SUVs and pickup trucks across developed and emerging economies is anticipated to fuel the segment growth. Limited slip differentials are not common in every vehicle. It is equipped in some vehicles as a standard and some high-performance vehicles models.
Off-road vehicles such as Jeep Wrangler, Jeep Grand Wagoneer, Toyota Land Cruiser, and many other luxury SUVs have advanced versions of LSD. These advanced differentials help them identify changing road conditions and enhance control over the vehicle. The luxury SUV sale is booming across the globe owing to the rising disposable income of the populace and their preference toward buying SUV and luxury featured cars considering safety measures. Therefore, increasing demand for luxury SUVs is anticipated to propel the segment growth in the coming years. Moreover, the sedan & hatchback segment is also expected to witness a considerable growth rate due to rising disposable income and increasing demand for driving comfort in developing economies.
Asia Pacific Limited Slip Differential Market Size, 2021 (USD billion)
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APAC led the global limited slip differential market with a market size of USD 1.71 billion in 2021 and is expected to continue leading the market in years to come. Rising awareness and demand for road safety across emerging countries of the Asia Pacific is likely to fuel the adoption of LSD. Additionally, increasing adoption of SUVs and high-performance vehicles in the region due to inclining consumer preference and rising disposable income is anticipated to fuel the product demand in the region. Moreover, the well-established automotive industry in Asia Pacific further supports the growth of the market in the region.
North America held the second-largest market share in 2021. Increasing luxury vehicles and high-performance car sales in the U.S. is likely to fuel the market growth in the region. In addition, the North America market is driven by a rise in the number of all-wheel drive system-equipped vehicles. Furthermore, stringent regulations related to driving safety are the top priority for the market players operating in this region. The companies' new strategies related to LSD will ensure proper growth of the market in the coming years.
Europe also contributed significantly to the growth of the market. The presence of the well-established automotive industry in European countries, such as the U.K., Germany, France, Italy, and others supports the limited slip differential market growth in the region. Additionally, the increasing demand for comfort driving, stringent automotive safety norms, and the implementation of the EURO-NCAP rating for cars, vehicles, and driver safety encourage automakers to adopt advanced LSDs to enhance the safety and comfort of their vehicles.
The rest of the world, which includes Latin America and the Middle East & Africa, has been witnessing a steady improvement in the economy over the last few years. Also, the significant increase in demand or use of super, luxury & premium vehicles in a few countries, including the UAE, South Africa, and Saudi Arabia, is propelling the market growth.
Strategic Partnerships to Drive Competition
The rivalry in the market is intensifying due to the presence of various manufacturers. Companies are heavily investing in the development of electronic limited slip differentials to update their key offering and cater to the increasing demand. The companies are rolling out their new e-LSDs to offer advanced LSD in the early stage. For instance, in 2020, Eaton unveiled an electronically controlled, variable bias, hydraulically actuated limited slip differential, which offers optimized automotive performance at various speed and traction conditions. Therefore, the increasing availability of e-LSDs from key manufacturers will positively influence the growth of the market.
Additionally, manufacturers are also utilizing cost reduction strategies along with strategic partnerships and acquisitions to develop modern automotive differential technologies to strengthen their position in the global market.
With Strong Product Portfolio, American Axle & Manufacturing is a Leading Key Player in Market
American Axle & Manufacturing, Inc. is one of the leading automotive parts and accessories suppliers based in the U.S. The company was established in 1994 and is headquartered in Michigan, U.S. It designs, engineers, and manufactures metal forming and driveline technologies for next-generation automobiles with enhanced safety, efficiency, weight-to-power ratio, and intelligent systems.
The company has 80 facilities across 17 countries worldwide to support its customers on regional and global platforms, focusing on operational excellence, quality, and technology leadership. The company is rolling out new products and utilizing strategic partnerships to strengthen its position in the market. For instance, in 2020, American Axle & Manufacturing, Inc. launched TracRite eLSD Electronic limited slip differentials for the Mercedes AMG GLS SUV.
In November 2021, American Axle & Manufacturing's TracRite differentials were the key components installed in the 2022 GMC HUMMER EV to deliver significant power and performance. The new super truck features AAM TracRite EL Electronic Locking Front Differential.
In October, Toyota Motor Corporation's new "Land Cruiser" was launched and equipped with LSD manufactured by JTEKT Corporation. The company's "TORSEN LSD Type-B," "TORSEN LSD Type-C," and "3rd Generation Tapered Roller Bearing Hub Unit" were installed in Toyota's new land cruiser.
An Infographic Representation of Automobile Limited Slip Differential Market
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The market research report provides a detailed and in depth analysis of the market and focuses on key aspects such as leading companies, product types, and leading applications of the product. Besides this, the report offers insights into the market trends and highlights key industry developments. In addition to the factors above, the report encompasses several factors that have contributed to the growth of the market in recent years.
Value (USD Billion)
By Application Type
Fortune Business Insights says that the market was valued at USD 3.39 billion in 2021 and is projected to reach USD 7.58 billion in 2029.
The market is expected to register a growth rate of 11.3% during the forecast period 2022-2029.
Increasing demand for road safety and the growing adoption of luxury SUVs are some of the factors driving the global market growth.
Asia Pacific led the global market in 2021.
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