By: Saranya Vasudevan, Lead Analyst
06 October, 2017
Wiring harness acts as the central nervous system of an automobile, as it enables communication and energy transmission between all the components of the vehicle.
The global automotive wiring harness market is witnessing significant changes due to a lot of new technologies coming on board in the automobile market. The need for next generation technology, along with cost and weight optimization are the key driving factors for technological advancements in the global wiring harness market.
Emission and safety standards of various governments have stepped up the need for weight reduction in automobiles. This is expected to be achieved through change in design and raw material subsitution. Technological needs aimed at achieving high performance and advanced communication are other factors which influence the developments in the automotive wiring harness market. This whitepaper will cover the trends in the global market, technological innovations, cost optimization efforts and potential changes in the supply base of automotive wiring harness.
From a business strategy standpoint, it is observed that access to technological advancements and ability to optimize cost through low cost country sourcing and raw material recycling are likely to be the key success factors for automotive OEMs. The major players in the market are expected to engage in strategic alliances, mergers and acquisitions (M&As) to widen their industry exposure and manufacturing presence.
Automotive Wiring Harness – An Introduction
Automotive electronics play an important role in controlling the overall functioning of a vehicle in different areas such as engine management, in-car entertainment systems, chassis and safety systems.
A wiring harness is a set of wires, terminals and connectors which transmits electric power and information, thereby enabling comunication between the key electronic and mechanical components of a vehicle. It plays a pivotal role in the automobile’s overall functioning, equivalent to that of a central nervous system.
Global Automotive Wiring Harness Market Overview
The global market for automotive wiring harness is expected to witness significant growth during 2017-2025 primarily supported by the need for smarter and lighter vehicles. The global market is estimated to reach $56 billion in 2020, with a CAGR of 7 - 8 percent as compared to the market in 2016.
Passenger vehicle segment, accounting for ~70 percent of the demand, is likely to lead the growth with an expected CAGR of 6-7 percent during the period. This market is expected to be dominated by the growth in Asia Pacific market. Shift towards electric cars, high performance expectations in terms of control, safety, weight and energy efficiency, etc. and the growing demand from the middle class population in Asia, are expected to drive the global demand for automotive wiring harness during 2017-20.
The HCV and LCV (Heavy and Light Commercial Vehicles) account for 6 percent and ~24 percent respectively, and are expected to grow at a CAGR of 4 to 5 percent during 2016-2020. Driven by governmental regulations, the need for monitoring systems, safety systems, anti-lock braking systems (ABS) and increasing demand for embedded telematics are expected to support the demand for wiring harness during the period.
Yazaki Corporation, Sumito Electric Industries Ltd., Delphi Corporation, Leoni Group, and Lear Corporation are the top manufacturers of automotive wiring harness at the global level.
Need for Innovation
Wiring harnesses are estimated to account for almost 50 percent of the labor costs of a vehicle, due to low level of automation in wiring harness production. Need for production cost optimization (especially material and labor cost), weight reduction and increased demand for highly connected vehicles have been the key drivers of innovation in the wiring harness market.
Governmental regulations in both developed and developing countries have been emphasizing on stringent safety and emmision standards. The same has led to the need for designing lighter vehicles with ability to meet the safety standards.
Automotive OEM’s Investment Trend
Global automotive OEMs are working hard on their R&D activities to meet the current and expected future demand and to keep pace with the growing competition. The same has led to growth in M&As and investments in R&D activities in the global automotive market.
Given below is the investment trend of the top 10 global automotive OEMs in capital expenditure, R&D and M&As:
The automotive market has been witnessing significant growth in investments since 2010-11. Industry majors are expected to invest further especially in their R&D activities to optimize cost and technology.
The recent M&As in the wiring harness market are listed as follows:
Source: Supplier websites
Most of the M&As in this industry are aimed at expanding the product portfolio or the geographical presence of the manufacturer.
Trends / Innovations In Wiring Harness
1. Technological Trends
a. Protocol Upgradations
Since the wiring harness functions as the main nervous system of the vehicle, the software / protocols play a critical role in the overall operation. CAN and LIN interfaces are the primary systems in use. CAN controls communication between main components of the vehicles door modules, power seat modules, weather control modules, etc. Whereas LIN controls other components such as heater, motor, mirrors, etc.
Despite technological advancements, CAN and LIN are expected to remain the key controlling interfaces. Other technologies in the market include CAN-FD (upgraded version of CAN), FlexRay (expensive replacement to CAN), MOST (provides layer to implement wireless communication) and Ethernet (LAN connection in an automobile).
The recent amendment of IEEE Standard - 802.3bw-2015 – for Ethernet is expected to support innovations in the wireless communication space over the new few years.
b. Speed Sensor Wiring Harness
Speed sensor wiring harness plays in critical part in the present day vehicles which are more focused on advanced-driver-assistance-system (ADAS). The demand for ADAS is expected to witness significant growth during 2017-2025, supported by high demand for “the connected car”. Need for sophistication, real time connectivity, in-vehicle applications and electricification of the vehicle are the key driving factors for demand.
Vehicle to Vehicle (V2V) and Vehicle to Infrastructure (V2I) are technologies which have been designed to provide better ADAS. Vehicle to X (V2X) technologies are in the testing phase, which are expected to support the auto / self driving cars with information about traffic, environment and other external factors to enable smooth driving experience.
2. Cost Optimization Trends
a. Derating of Wiring Harness
Weight and heat reduction objectives have given way to the line of thought surrounding alteration of the temperature rating of the wire. The rating typically limits the energy current that can pass through the wire, before it gets heated up. The situation becomes thermally complex when the wire harness is placed in an wiring interconnect system. Derating of a wire harness is expected to enable material substitution and lead to a balance between heat and weight reduction goals.
Operational temerature, environmental temperature and pressure control are key factors which determine the derating of a wire harness. Based on these requirements, the wire harness system is design and tested.
b. Raw Material Substitution Trend
Sustainability and environmental factors have led to the need to reduce the overall weight of a vehicle. Higher the weight, higher the fuel comsumption and lesser battery life. The same has led to trends in raw material substitution in most of the automotive components where steel and copper are being replaced with aluminum, copper based alloys, etc.
Copper is the primary raw material for wiring harnesses due to its features such as high conductivity, ductility and consistency. Innovations in design of the wire harness are typically aimed at reducing the metal content, thereby reducing the weight or subsitituting a lighter metal such as aluminum in place of copper. However, aluminum has issues with its corrosion resistance ability. Engineers from BMW and scientists from Technische Universitaet Muenchen have worked together on a concept for aluminum electrical connection / wiring harness named LEIKO, which is likely to overcome the cons of aluminum.
According to industry sources, the subsitution / innovation trends might lead to a total reduction of copper content of 0.8 kg per car by late 2020, as copper cannot be replaced completely due to its favourable features.
c. Recycling of Automotive Wiring Harness
With increasing demand for copper as the raw material for wiring harness and lack of large level subsitutes availability, copper recycling has become very important. Toyota Motor Corporation in alliance with Yazaki Corporation, Toyota Tsusho Corporation and seven other dismantling companies, became the pioneer in setting up a plant for recycling of automotive wiring harness in 2013, at Chubu, Japan. Since April 2013, a total of 127 tons of copper (99.96% purity) have been recovered. Other major industry players are likely to follow suit and engage in recycling activities to provide better control over raw material sourcing.
Potential Changes In Supply Bases Of Wiring Harness
Depicted below is the typical supply chain for a wiring harness:
Chinese government’s “Made in China” initiative has led to a high level of vertical integration efforts in the market, across different industries. Chinese automakers are also working towards sourcing their raw materials and components made in the domestic market.
APAC is estimated to account for 30 percent to 35 percent of the global production of automotive wiring harness during 2016. With the middle class population of developing countries, especially China and India, expected to drive the passenger car and commercial vehicle demand during 2017-2025, a potential shift in manufacturing base of major wiring harness suppliers is expected during the period. The shift is likely to increase APAC’s share of global automotive wiring harness production to about 50 percent by 2025.
Japan, Germany and the US are expected to remain the technology centers for the automotive wiring harness market. However, China is likely to remain as the top manufacturer.
The automotive wiring harness market is expected to grow in pace with the demand for electric vehicles till 2025. The need for high performance and cost effectiveness are the key factors expected to drive the innovations in the market. Listed below are the look out factors and recommendations for automotive OEMs:
Recycling of Wiring Harness
Major automotive wiring harness manufacturers are working with automotive dismantlers to obtain the used wires and recycle them to obtain copper. Despite the fact that the percentage of recycled wires is low at present, the market is expected to witness significant growth due to growing demand for copper-based wires.
Following the example of Toyota, other major automotive OEMs are also expected to collaborate with dismantlers and secure their copper requirement through recycling of the wiring harness. M&As are viewed as a potential strategy to gain access to dismantling / recycling capabilities for top automotive OEMs.
Potential Relationship with Technology Majors
With increasing demand for Advanced-Driver-Assistance-System (ADAS), technology industry majors such as Apple and Waymo are expected to play a vital role in prototyping and testing of self-driving technologies.
Major companies that excel in technological capabilities are expected to partner with or acquire wiring harness manufacturers with plants across low cost countries, thereby creating a win-win situation for both the companies. The same is expected to support vertical integration in the global automotive wiring harness market.