Frost: TPMS aftermarket to triple in size

MOUNTAIN VIEW, Calif. (May 28, 2015) — Tire pressure sensors are becoming the fastest-growing product in the automotive aftermarket, according to a Frost & Sullivan Inc. report.

Demand for tire pressure monitoring system (TPMS) sensors is expected to triple by 2018-20, Frost & Sullivan's Oindrila Bhar said, as TPMS sensors installed since the 2007 U.S. TREAD Act start failing and European legislation mandating TPMS on new vehicles sold in the EU27 region takes effect. Ms. Bhar is a research analyst for Frost & Sullivan's automotive and transportation global aftermarket sector.

The research firm expects the total market to grow to $365.5 million in 2020 from $121.1 million in 2013, a compound annual growth rate of 17 percent.

Expired sensor batteries are expected to be the key demand driver in North America, while winter tire sales will have the largest impact in Europe. In 2014, unit shipments increased to about 7.8 million for North America and 1.4 million for Europe, Frost reported.

However, extended battery life could dampen demand. The first generation of sensors is expected to expire after seven to eight years of service and is just now entering the aftermarket after TPMS became mandatory under the TREAD Act in 2007, according to Frost. However, these batteries continue to last in excess of 10 years on some TPMS platforms. Longer life of sensor batteries will defer more replacements beyond the 2015–2020 forecast period.

Frost also predicted revenue growth will be higher in Europe than in North America because the European market is less mature. Direct TPMS-equipped vehicles will enter the aftermarket in significantly larger numbers in both regions during the forecast period, driving both unit shipments and revenue growth higher.

Manufacturer-level prices were about $18 per unit in North America in 2013 and about $26 in Europe. Prices will decrease in the coming years as demand increases and more programmable and universal fit sensors become available as aftermarket parts.

As replacement rates increase, more tire shops, wholesale distributors and retailers will begin to carry TPMS sensors and Frost predicts independent garages will be servicing more TPMS systems than other outlets.

As the market becomes competitive, Frost expects TPMS makers to consolidate to attain economies of scale and expedite the learning curve.

For instance, Netherlands-based sensors and controls manufacturer Sensata Technologies Holdings N.V. acquired Schrader International in August 2014.

This combination is estimated to have a market share of 55 percent. The market comprises five main direct TPMS producers that supply OE automotive and commercial applications, according to Frost.

Therefore, the TPMS market is predicted to undergo changes in the form of mergers and acquisitions in the wake of a potential market size expansion. Despite the growing threat that more auto makers will adopt “indirect” TPMS — which does not include tire pressure sensors — direct TPMS represents about 75 percent of the TPMS market in  Europe and 84 percent in North America, according to Frost research.

“For this high growth potential to materialize, installers must convince consumers to replace the sensors upon expiration. The sensor replacement is most likely to happen when the vehicle's tires are replaced,” Ms. Bhar said.

“With such high growth potential, manufacturers, distributors, and installers should work together to educate consumers about the safety benefits of TPMS.”