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Impact of COVID-19 on automotive test equipment market?

The automotive industry has witnessed a rapid evolution with continuous developments in engineering and technology. Technological advancements and the advent of disruptive trends such as connected, autonomous, and electric vehicles have proliferated the demand for electronics in vehicles. As a result, the demand for high-level testing is hugely required for the overall safety of these vehicles. The global Automotive Test Equipment Market size is expected to show growth at a CAGR of 4.1% from USD 3.0 billion in 2020 to reach USD 3.7 billion by 2025. Increasing vehicle production and stringent government regulations pertaining to vehicle testing are anticipated to boost the automotive test equipment market. Moreover, the major factors driving this growth are increasing vehicle production and rising electronic architecture in modern vehicles.

COVID-19 impact on Automotive Test Equipment market:
Major automotive test equipment providers such as Bosch, Continental, etc. have announced the suspension of production due to the lowered demand, supply chain bottlenecks, and to protect the safety of their employees in France, Germany, Italy, and Spain during the COVID-19 pandemic. As a result, the demand for automotive testing equipment is expected to decline in 2020. Manufacturers are likely to adjust production to prevent bottlenecks and plan production according to demand from OEMs and tier 1 manufacturers.

Major automotive test equipment providers lost revenue in Q1 2020. As the resumption of vehicle production is not likely in the immediate future due to the severity of the pandemic, especially in the US and major European countries, tier 1 players suspect a further decline in revenue in the remaining quarters of 2020. For instance, Continental has witnessed a decrease in operations due to the COVID-19 pandemic. As of April 2020, the increased outbreak of the virus has forced the company to temporarily cease production in more than 40 percent of its 249 production locations across the world. For the first quarter of 2020, Continental had estimated sales at USD 4.5 billion compared to USD 5.3 billion in 2019 during the same period. The impact of COVID-19, along with other factors, has resulted in a loss of approximately USD 800 million for the company. As per the IMF report, the year-on-year decline in the GDP of the US is estimated to be 5.9%, while 6.2% and 6.6% for Canada and Mexico respectively for the year 2020. This decline in GDP is expected to affect the future performance of the company significantly, as the North America region contributes to 26% of the company revenue. The major countries in Asia, such as China and India, are also expected to experience a year-on-year decline in GDP of 1.2% and 1.9%. As Asia contributes to 22% of the company’s sales, the impact of COVID-19 on Continental AG is expected to continue for the coming years, and its impact expected to be significantly large.

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The vehicle emission test system segment is projected to have the highest growth rate in the automotive test equipment market, by product type, during the forecast period of 2020-2025. Various countries across the globe are coming up with stringent regulations concerned with emission testing, for instance, in India, all new cars are expected to be issued with pollution certificates which are expected to be valid for a year, post which, vehicles need to be tested for pollution levels every six months.

Mobile/ tablet-based equipment is projected to have the highest growth rate in the automotive test equipment market, by application, during the forecast period of 2020-2025. Technological advancements have enabled make mobiles and tablets much smarter and efficient. The fact that these are much more mobile and data easily accessible enables the growth of the mobile/tablet-based equipment segment.

OEM R&D/ technical center is projected to have the highest growth rate in the automotive test equipment market, by the end market, during the forecast period of 2020-2025. The growth of this segment is attributed to the fact that the adoption of organic strategies by OEMs is expanding its reach to its consumers by establishing more research centers. For instance, in June 2018, Continental AG established its third R&D center in Singapore, which leverages Singapore’s strong research capabilities to develop, test, and commercialize mobility solutions to serve the region’s increasing needs for mobility.

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The passenger car segment is projected to have the highest growth rate in the automotive test equipment market, by vehicle, during the forecast period of 2020-2025. The growth of this segment can be attributed to the increased focus on testing emission levels to meet stringent norms, as the passenger car segment is expected to be among the top pollution causing vehicle types.

Asia Pacific is projected to have the highest growth rate in the automotive test equipment market, by region, during the forecast period of 2020-2025. The growing automotive production in India and China is the key driving factor for the growth of the Asia Pacific market. Besides growing production, high presence of authorized service center is further driving the market in the region

Key Players

The global automotive test equipment market is dominated by major players such as ABB (Switzerland), Robert Bosch GmbH (Germany), Horiba Ltd(Japan), Honeywell (US), Siemens AG (Germany), and Delphi Technologies (UK).

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