The Light Duty Vehicle Market is forecast to reach $560 billion by 2025, growing at a CAGR of 9.1% from 2020 to 2025. Demand for light duty vehicle is expected to increase due to the lower amount of air pollution that is caused by them. Furthermore, it is anticipated that strict regulations aimed at reducing vehicle emissions would stimulate the adoption of electric light duty trucks and thus drive the market growth over the forecast period. Light duty vehicle tend to emit lower volumes of air pollutants and are hence turning out to be the preferred vehicle to transport people and goods.
- North America dominated the market in 2019 with a share of 39% owing to the growing adoption of electric vehicle in line with the government initiatives favouring the development and adoption of electric vehicle and the rollout of electric vehicle charging infrastructure.
- The passenger car segment accounted for 28% of the market share in 2019 attributed to the growing adoption of passenger cars by incumbents of the tourism industry.
- One of the major factors boosting the light duty vehicle market is the increased demand for Special Utility Vehicles (SUVs) in the recent years.
- One of the main factors hindering the growth of light duty vehicle industry is rising costs of raw materials.
Light Duty Vehicle Market Segment Analysis – By Vehicle Type
On the basis of vehicle type, the market for light duty vehicle has been further segmented into passenger car, van, Sports Utility Vehicle (SUV), and pickup truck. The passenger car segment accounted for 42% of the market share in 2019. Growth in this segment is attributed to the growing adoption of passenger cars by incumbents of the tourism industry. Additionally, the governments of various countries have issued regulations that have led the passenger car manufacturers to produce efficient and low-emission vehicles which have intensely pressurized the latter to engage in research and development works. European Emission Standards (EURO I, EURO II, EURO III, EURO IV and EURO V), Corporate Average Fuel Economy (CAFE) and Federal Motor Vehicle Safety Standards (FMVSS) are few of the most common emission standards followed in the global regions. Consequently, these regulations are boosting the production of low emission passenger cars, thereby driving he overall market during the forecast period.
Light Duty Vehicle Market Segment Analysis – By Fuel Type
Of all the major light duty vehicle fuel types, the gasoline segment held the largest share accounted to 57% in 2019. This is because gasoline-fired vehicles emit lesser emissions as compared to diesel-fired vehicle and can also be procured affordably. However, the electric segment is expected to register the highest CAGR of around 14.3% over the forecast period owing to the growing demand for high-performance and emission-free vehicles. Advances in technology coupled with proactive government initiatives to reduce vehicle emissions are encouraging the development and adoption of electric vehicles and the rollout of charging infrastructure for electric vehicles, thereby driving electric segment growth. Manufacturers of light duty electric vehicles are incentivizing customers for buying electric vehicles. At the same time, while countries, such as China, France, and Norway, have imposed stringent rules and regulations aimed at reducing vehicular emissions, other countries, such as China, the U.K., the Netherlands, and the Czech Republic, have implemented low emission zones in certain areas. Such initiatives are also expected to drive the growth of the electric segment.
Light Duty Vehicle Market Segment Analysis – By Geography
The light duty vehicle market was segmented by region into North America, , South America, Europe, Asia – Pacific, Middle East and Africa. North America dominated the market in 2019 with a share of 39% owing to the growing adoption of electric vehicles in line with the government initiatives favouring the development and adoption of electric vehicle and the rollout of electric vehicle charging infrastructure. However, due to the evolving e-commerce industry, particularly in China, India , and Japan, Asia Pacific is expected to emerge as the fastest-growing regional market with a CAGR of around 16.2% over the forecast time period. It is also anticipated that stringent regulations aimed at curbing vehicle emissions will drive demand for light duty electric vehicles in Asia Pacific.
Light Duty Vehicle Market Drivers
- Increased demand for Special Utility Vehicles (SUVs)
One of the major factors boosting the light duty vehicle market is the increased demand for Special Utility Vehicles (SUVs) in the recent years. Small cars are also growing at a fast pace as they find less traffic on the road as compared to large passenger vehicles. The emerging market for vehicle financing has stimulated the passenger vehicle industry where loans are given to the customers to purchase the car. Moreover, Passenger vehicles are the most common mode of conveyance in the developed countries and they are increasing in numbers in the developing countries as well due to increasing per capita income.
- Stringent regulations for emissions for vehicles
Emission Standards (EURO I, EURO II, EURO III, EURO IV and EURO V), Corporate Average Fuel Economy (CAFE) and Federal Motor Vehicle Safety Standards (FMVSS) are few of the most common emission standards followed in the global regions. Governments in different countries are creating awareness towards low emission by vehicles through these regulations and standards which is thereby resulting in increased demand for low emission light duty vehicle and hence boosting the light duty vehicle market during the forecast period 2020 – 2025.
Light Duty Vehicle Market Challenges
- Increase in raw material prices
One of the main challenges for the passenger vehicles industry is rising costs of raw materials. In recent years, iron, steel and plastics costs have risen to high levels that have resulted in rise in passenger vehicle costs for customers. High cost of raw materials results in high production costs, thereby increasing the overall product cost. This is set to hinder the market growth during the forecast period 2020 – 2025.
Light Duty Vehicle Market Landscape
Product launches, acquisitions, and R&D activities are key strategies adopted by players in the Light Duty Vehicle Market. Light Duty Vehicle driver market is expected to be dominated by major companies such as BMW AG, Daimler AG, Fiat Chrysler Automobiles N.V., Ford Motor Company, General Motors Company, Honda Motor Company, Ltd., Hyundai Motor Company, Nissan Motor Company, Ltd., Subaru Corporation, and Toyota Motor Corporation) among others.
- In May 2019, Tata Motors has planned to to replicate the success of the Ace with the Intra—the two-tonne-plus LCV it will launch by end-May. This product launch is aimed at boosting the revenue of the company in its business segment of light commercial vehicles.
- In June 2020, major key players of the market including Renault-Nissan, Volkswagen, and Daimler, announced their plans on working on building common platforms for light duty vehicle and passenger vehicles as part of the efforts to reduce lead times and save on development costs.