The automotive sector is witnessing a rapidly growing installed base of sensors owing to increased need for performance, safety, comfort and convenience. With a growing use of electronically controlled components on vehicles, traditionally-used sensors are being complemented by sensors for new applications.

Legislation also plays a significant role in driving demand for sensors. For example, the TREAD Act makes installation of tire pressure monitoring systems (TPMS) mandatory in all vehicles, driving installation of tire pressure sensors in light-duty vehicles at the original equipment (OE) level, consequently driving corresponding aftermarket demand. Similarly, the North American aftermarket demand for sensors is driven by tightening emission standards. Since 1980, most light-duty vehicles come equipped with one or two oxygen sensors that have become vital in reducing exhaust emissions. Since the introduction of Onboard Diagnostics II in 1995-96, the number of oxygen sensors per vehicle has doubled with the extra sensors being used downstream of the catalytic converter to monitor its operating efficiency.

Oxygen sensors require replacement as a result of normal wear and tear or because of premature failure resulting from contamination. The mandatory emission testing process increases the likelihood of detection and replacement of failed sensors (especially oxygen sensors), giving a major boost to aftermarket demand. According to the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB), oxygen sensor replacement is required on 42 percent to 58 percent of all vehicles subjected to emissions checks.

In addition to regulations, technological shifts in the market are also driving aftermarket growth. For example, some in-line four-cylinder engines have split exhaust manifolds that are equipped with an oxygen sensor. While such shifts boost sensor installation rates at the OE level, they also result in driving aftermarket demand when the corresponding part fails or enters replacement age.

Other factors that contribute to aftermarket unit shipment growth for sensors are increased installer awareness and consumers growing more conscious about maximizing a vehicle’s fuel efficiency through regular maintenance and replacement. Failed oxygen sensors increase the risk of damage to the catalytic converter, while also impacting peak engine performance. Regular maintenance and timely replacement of an oxygen sensor can improve fuel economy by almost 15 percent, resulting in around $100 of savings per year from fuel costs.

However, in the medium to long term, growth is likely to be offset by factors that restrain market unit volumes and prices. As large segments of the vehicle population enter replacement age, price is expected to become the determining adoption factor, leading to commoditization of sensors.

Further, engines typically require one oxygen sensor immediately after each bank of cylinders, as well as one after the catalytic converter. Thus, engines with multiple cylinder banks require more sensors to be replaced. However, with vehicles becoming lighter and more fuel-efficient, the percentage of such engines is expected to drop, offsetting replacement demand for oxygen sensors.

Also, aftermarket suppliers need to be aware of changing consumer behavior. Consumer demand for reliability has spurred the development of second-generation heated oxygen sensors. Heated sensors have a small heating element inside to help them reach operating temperature more quickly and improve sensor performance. The second-generation heated oxygen sensors are typically used in newer vehicles and require replacement after every 100,000 miles, as compared to first-generation heated oxygen sensors used on mid-1980s to mid-1990s vehicles that required replacement after every 60,000 miles. As the percentage of late-model vehicles in the total vehicle population increases, so will the OE installations of second-generation heated sensors. With a much lower replacement rate, this is likely to restrain the aftermarket demand for oxygen sensors.

As the aftermarket environment for these sensors continues to evolve and become increasingly challenging, suppliers will be evaluated based on robustness, reliability, quality and price of their parts. Inventory management will become critical as new sensors are installed at the OE level and aftermarket participants will need to pay attention to vehicles within the prime replacement years to ensure appropriate application coverage.

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