Automotive Drivetrain Market Report 2025 (Global Edition)

Market Dynamics of the Automotive Drivetrain Market

Key Drivers of the Automotive Drivetrain Market

• Global sales of electric and hybrid cars are rising

Globalization is causing fast changes in the automotive industry. Emissions have been somewhat decreased by using electric vehicles, and this is anticipated to be the main driver of the increase in the market share of automotive drivetrain. Furthermore, the government's incentives for electric vehicles, which include tax breaks, free parking, and various subsidies, are driving up demand for them at a rapid pace. Furthermore, the majority of rising nations, like China, India, and Brazil, have made significant investments in the development of their infrastructure, which has increased sales of hybrid and electric cars. 

.•    For Instance: On Nov 19, 2020 – According to the World Economic Forum, the Government of the UK announced that they would be discontinuing the production of new petrol and diesel cars from the year 2035.

https://www.autocarindia.com/car-news/uk-government-to-ban-sales-of-new-petrol-and-diesel-cars-from-2030-419233#:~:text=Prime%20Minister%20Boris%20Johnson%20has,will%20be%20allowed%20until%202035.

This will not only help the market for electric cars to grow, but it will also increase demand for parts connected to electric vehicles, like e-axles and in-wheel motors. A positive impact is projected over the projection period since the market for electric drivetrain systems is directly impacted by the demand for hybrid and electric automobiles.

• Future car development will incorporate all-wheel drive, and technical advancements will spur market expansion

The industry is expanding because of the increasing advancements in all-wheel drive (AWD) for future passenger cars and SUVs. Original equipment manufacturers' (OEMs) driveline industry will soon be impacted by the significant shift in consumer demand. There have been notable increases in volume for the all-wheel drive variants in North America, China, and Europe.

•    For Instance: On Apr 7, 2020 – Audi officials stated that every second, the Audi Quattro model is driven by all-wheel drive.

https://www.audi-mediacenter.com/en/press-releases/audi-quattro-sets-standards-in-the-age-of-electric-mobility-13054

Furthermore, the fourth-generation Toyota Prius, which is anticipated to hit the market in the upcoming years, along with potential AWD EVs from Land Rover, Chevrolet (Volt), and other manufacturers would open up chances for the EV drivetrain market.

The new integrated drivetrain system utilized in cutting-edge automobiles is another project on which the corporations are collaborating. The reduction in engine size, with an emphasis on fuel efficiency, has encouraged several manufacturers to create technologically advanced products. The market is anticipated to be driven throughout the forecast period by research and development product launches from industry players for electric and fuel cell commercial vehicles that combine high torque with improved acceleration, traction, and towing capabilities.

• Rise in the adoption of electric vehicles boosts the Automotive Drivetrain market 

The transformation to electric vehicles (EVs) is the primary driver revamping the automobile drivetrain industry, driven by strict emission rules, government subsidy, and increased consumer interest in eco-friendly means of transportation. As nations around the globe enact ambitious greenhouse gas emission reduction plans, there is a unified movement away from conventional internal combustion engine (ICE) vehicles towards EVs. For instance, the U.S. EV sales share was only 4% in 2021 and 7% in the first 6 months of 2022. However, it’s nowhere near President Biden’s goal of 50% EV sales share by 2030. 
(Source - https://theicct.org/us-ghg-standards-ev-sales-sep22/ )
This transformation is having a large impact on the drivetrain segment, since components that were long established for ICE vehicles, i.e., multi-speed transmissions, driveshafts, and differentials, are being redesigned or replaced in order to integrate with the EV-specific features. 
In contrast to ICE cars that utilize multi-speed transmissions for the control of power delivery, EVs will predominantly employ single-speed transmissions. This is facilitated by the inherently greater efficiency and torque output of electric motors, and the ability of electric motors to run over a wide range of speeds without gearing systems. Therefore, there is a need for car manufacturers to work on creating drivetrains that are particularly adapted to the performance characteristics of electric motors, which means different design concepts and technologies.
To make EV drivetrains more efficient and perform better, companies are putting a lot of money into advanced cooling systems, lightweight materials, and optimized motors. These technological advancements not only enhance power transmission but also have a positive effect on the driving range and efficiency of EVs. Also, government support and growing customer demand for green cars are speeding up the demand for EVs, which is directly driving growth in the automotive drivetrain market, propelling technological innovation and changing the face of vehicle powertrains in the future.
 

Restraint of the Automotive Drivetrain Market

• Growth in the automotive drivetrain market is constrained by related high costs and volatile raw material prices

 Significant expenditures for engineering, testing, and research are associated with the development of innovative drivetrain technology and components. Any drivetrain installed in a car has a different price depending on the specifications and design. It immediately raises the price of the car as a whole. Cost increases are a direct result of higher engine capacity and more features in vehicles. Additionally, the use of expensive/advanced raw materials and their variations in price by location are the main causes of this cost increase. As a result, the cost of steel and powder processing to meet the growing demand for powerful and comfortable cars will be constrained by this factor. These high development costs might be a barrier to entry or rival those of more established companies, especially for smaller manufacturers and start-ups. Consequently, these challenges are impeding the growth of the automotive drivetrain industry.

• High cost and fluctuating raw material prices hamper the market growth 

High costs and fluctuating raw material prices are significant restraints for the growth of the automotive drivetrain market. The production of automotive drivetrain components, such as transmissions, axles, and driveshafts, requires the use of specialized raw materials, including high-grade steel, aluminum, copper, and rare-earth metals. The prices of these materials are subject to market volatility due to factors such as global supply chain disruptions, geopolitical instability, and fluctuations in demand from various industries. This volatility makes it challenging for manufacturers to maintain stable production costs, which can impact overall profitability and pricing strategies.
The high cost of advanced materials, such as lightweight alloys or materials needed for electric vehicle (EV) drivetrains, further exacerbates the issue. For instance, the increased adoption of EVs requires the use of specialized components like high-performance electric motors and batteries, which rely on costly materials such as lithium, cobalt, and nickel. As the demand for these raw materials rises, so does the cost of production, leading to higher prices for consumers. The prices of lithium and cobalt more than doubled in 2021, and those for copper, nickel and aluminium all rose by around 25% to 40%. 
(Source - https://www.iea.org/commentaries/critical-minerals-threaten-a-decades-long-trend-of-cost-declines-for-clean-energy-technologies )
In addition to material costs, the complex manufacturing processes required for drivetrain components add to the financial burden. The need for precision engineering, testing, and advanced technologies to meet performance standards further drives up costs. This combination of high production costs and fluctuating raw material prices poses a significant challenge for automakers, particularly smaller manufacturers or those in price-sensitive markets, limiting their ability to innovate or reduce prices, thereby restraining the growth of the automotive drivetrain market.

Impact of the COVID-19 on the Automotive Drivetrain Market

The COVID-19 pandemic significantly harmed the economy as a whole, particularly the automotive industry. Due to COVID-19, the automotive sector experienced severe headwinds and volatility, which had a substantial influence on volume reduction, recovery rate variability (light vehicle manufacturing), and numerous other factors.

As a result, the production of drivetrain components witnessed a decline due to the world’s economic ecosystems. Moreover, the raw material required to produce components was facing severe challenges. In addition, uncertainty pervaded the entire auto sector, affecting all participants in the value chain. Significant resource bottlenecks that noticeably affected many suppliers' companies throughout the year occurred in the global supply and logistics chains.

Additionally, businesses in the automobile drivetrain technology sector have experienced a 17–19% drop in revenues. But there is hope that the government's recovery measures would help to bring sales back to normal. Companies that accelerate e-drive development growth also prioritize maintaining communication with suppliers and customers as well as streamlining a robust supply chain. These actions enable the company to react to a recovery dynamically.

Opportunities of the Automotive Drivetrain Market

• Stringent emission standards to minimize vehicle mass and emission 

The lightweight design and higher efficiency of electric vehicles have led to a noticeable growth in demand for them. As a result, e-axles and in-wheel hub motor installations in all kinds of cars have increased dramatically. Additionally, this type of installation lessens the space needed for engines and CO2 emissions. An internal combustion engine provides power to the standard gas-powered car.

In an ideal scenario, the fuel is completely burned by the combustion system, producing just carbon dioxide and water as waste. In reality, though, the combustion system produces several greenhouse gases that pollute the environment. Conversely, an electric car doesn't emit any pollutants because it runs on an electric motor that is continuously fuelled by current. Furthermore, strict government laws and regulations regarding vehicular emissions have been enacted in the U.S., Germany, France, and China. As a result, automobiles are required to deploy innovative technologies to combat and reduce emissions and vehicle weight. 

Additionally, the California Air Resources Board (CARB) has established guidelines for manufacturers to produce and deliver zero-emission vehicles (ZEVs). This has significantly increased the likelihood that electric vehicles will be adopted and will drive the market for automotive drivetrain systems.

An automotive drivetrain refers to the system that transmits power from the engine to the wheels, enabling a vehicle to move. Emissions have been somewhat decreased by using electric vehicles, and this is anticipated to be the main driver of the increase in the market share of automotive drivetrain. The industry is expanding because of the increasing advancements in all-wheel drive (AWD) for future passenger cars and SUVs. The lightweight design and higher efficiency of electric vehicles have led to a noticeable growth in demand for them. Because of growing car sales, consumer preferences for comfortable rides and pollution-free commutes, rapid technological breakthroughs, and a sizable consumer base North America leads the global automotive drivetrain industry.

Frequently Asked Questions