Automotive Engineering Services Outsourcing Market Size, Share & Trends Analysis Report By Application, By Service (Designing, Prototyping), By Location (On-shore, Off-shore)- Global Industry Analysis, Share, Growth, Regional Outlook and Forecasts, 2024-2033

The global automotive engineering services outsourcing market was exhibited at USD 84.88 billion in 2023 and is projected to hit around USD 247.60 billion by 2033, growing at a CAGR of 11.3% during the forecast period of 2024 to 2033.

Key Takeaways:

• The Asia Pacific regional market accounted for the largest revenue share of around 44.0% of the automotive ESO market in 2023
• The powertrain and after-treatment segment registered for the largest revenue share of around 31.0% of the automotive ESO market in 2023. 
• The prototyping segment accounted for the largest revenue share of more than 31.0% in 2023 and is expected to lead the automotive ESO market throughout the forecast period.
• The on-shore segment accounted for the largest revenue share of around 60.0% of the overall market in 2023 and is expected to register the fastest growth in the forecast period.

Automotive Engineering Services Outsourcing Market by Overview 

The automotive engineering services outsourcing market has experienced significant growth in recent years, driven by the dynamic landscape of the automotive industry. Outsourcing engineering services has become a strategic imperative for automotive companies seeking to stay competitive, reduce time-to-market, and leverage specialized expertise. This overview delves into key facets of the automotive engineering services outsourcing market, providing insights into its current state, growth drivers, and future trends.

Automotive Engineering Services Outsourcing Market Growth

The growth of the automotive engineering services outsourcing market is propelled by various factors contributing to its upward trajectory. Cost efficiency stands out as a primary driver, allowing automotive companies to optimize expenses by accessing specialized expertise without maintaining in-house teams. The global talent pool plays a pivotal role, enabling organizations to leverage diverse skills and knowledge for accelerated product development. By outsourcing non-core engineering tasks, companies can strategically focus on their core competencies, such as product conceptualization and market strategy. The continuous evolution of automotive technologies, including electric and autonomous vehicles, acts as a catalyst, fostering demand for specialized engineering services. As the industry witnesses these advancements, the outsourcing of engineering services becomes instrumental in navigating the complexities of technological innovation and staying at the forefront of market trends.

Automotive Engineering Services Outsourcing Market Report Scope

Automotive Engineering Services Outsourcing Market Dynamics

• Technological Advancements Driving Demand:

The dynamics of the Automotive Engineering Services Outsourcing market are significantly influenced by ongoing technological advancements in the automotive industry. The rapid evolution of electric vehicles (EVs), autonomous driving technologies, and connectivity solutions has created a demand for specialized engineering expertise. Automotive companies increasingly turn to outsourcing partners to access the latest technological know-how and stay ahead in the competitive landscape.

• Globalization and Access to Diverse Talent:

A key dynamic shaping the automotive engineering services outsourcing market is the globalization of talent. Companies seek to tap into a global pool of skilled professionals to gain access to diverse expertise and perspectives. The ability to engage engineering teams from different regions provides automotive companies with a strategic advantage in terms of flexibility and innovation. 

Automotive Engineering Services: Outsourcing Market Restraint

• Data Security Concerns:

A prominent restraint in the automotive engineering services outsourcing market is the persistent concern over data security. With the increasing reliance on digital technologies and the exchange of sensitive engineering data between automotive companies and outsourcing partners, ensuring robust cybersecurity measures becomes paramount. Companies often grapple with the challenge of safeguarding intellectual property and confidential information throughout the outsourcing process. Mitigating data security risks requires stringent protocols, transparency, and collaborative efforts to establish a secure environment for information exchange.

• Communication Barriers:

Another significant restraint in the automotive engineering services outsourcing market is the presence of communication barriers. The collaboration between automotive companies and outsourcing partners often spans geographical and cultural boundaries, leading to challenges in effective communication. Differences in time zones, languages, and work cultures can impede seamless collaboration and hinder project progress.

Automotive Engineering Services Outsourcing Market Opportunity

• Electric and Autonomous Vehicle Engineering Opportunities:

A significant opportunity within the Automotive Engineering Services Outsourcing market lies in the increasing demand for expertise in electric and autonomous vehicle engineering. As the automotive industry undergoes a transformative shift towards electrification and autonomous technologies, companies are seeking specialized engineering services to stay competitive. Outsourcing partners can capitalize on this trend by offering comprehensive solutions, including electric powertrain design, battery technology optimization, and autonomous vehicle software development. 

• Digital Twin Technology Integration:

An emerging opportunity in the automotive engineering services outsourcing market is the integration of digital twin technology. Digital twins, or virtual replicas of physical products or processes, offer immense potential for enhancing product development and testing in the automotive sector. Outsourcing partners can seize this opportunity by providing advanced simulation and modeling services, enabling companies to create and analyze digital twins for various components and systems.

Automotive Engineering Services Outsourcing Market Challenges

• Data Security Concerns:

A primary challenge in the automotive engineering services outsourcing market is the persistent concern surrounding data security. With the increasing digitalization of engineering processes, sensitive information, including intellectual property and proprietary designs, is exchanged between automotive companies and outsourcing partners. Mitigating the risk of data breaches and ensuring the confidentiality of critical information becomes a paramount challenge.

• Communication Barriers:

Communication barriers pose a significant challenge in the automotive engineering services outsourcing market, particularly when collaborating across diverse geographical and cultural landscapes. Differences in time zones, languages, and work cultures can lead to misunderstandings, delays, and misalignment of expectations. Overcoming these communication challenges requires proactive strategies, such as the use of effective collaboration tools, regular updates, and fostering a shared understanding of project objectives.

Segments Insights:

Application Insights

The powertrain and after-treatment segment registered for the largest revenue share of around 31.0% of the automotive ESO market in 2023. This is attributed to the electrification of powertrains as a replacement for Internal Combustion Engines (ICE) fueled by petroleum and gasoline that can minimize the impact of carbon emissions on the environment. The significant investments by OEMs in the powertrain technologies are anticipated to positively impact the growth of the powertrain and after-treatment segment.

Moreover, the adoption of autonomous driving/ADAS is expected to witness significant growth in the forecast period due to its ability to sense & identify its environment and offer a safe movement. ADAS comprises various sensors, including lidar, GPS, radar, inertial measurement units, and others that provide advanced sensory information and control systems to navigate paths.

The infotainment & connectivity segment is estimated to register the fastest CAGR growth of over 14.2% during the forecast period. This is attributed to the emerging needs of end-users for the incorporation of advanced digital solutions in vehicles. The connected cars offer movies, social media, music, voice control, and other features that provide suitability and ease to the user, thereby providing prospects to the ESPs.

Furthermore, the body & chassis segment accounted for substantial growth in the revenue share in 2023 due to the rapid production of green vehicles that reduce harmful emissions. The growing focus of end-users on safety and light vehicle structure is expected to drive the demand for chassis in the forecast period.

Service Insights

The prototyping segment accounted for the largest revenue share of more than 31.0% in 2023 and is expected to lead the automotive ESO market throughout the forecast period. This is attributed to the increased deployment of 3D printing technology by the automotive industry to design a prototype of an assembly, certain parts, or a model of an entire car. With the 3D printing technology, manufacturers can quickly identify loopholes in the prototype and take corrective measures timely, supporting a cost-efficient approach. Companies are increasingly deploying 3D CAD software to improve communications through documentation, increase the productivity of the design, create a database for manufacturing and improve the quality of design.

The testing segment is expected to register fastest expansion by a CAGR of more than  12% during  the forecast period as ESPs are investing in the construction of new test centers in an attempt to expand and meet the increasing requirements for the automotive testing. For instance, in March 2019, Bertrandt AG expanded its high-voltage test center in Ehningen with an investment of USD 17 million to address the growing need for high-voltage test resources.

Moreover, the designing segment is anticipated to register a significant growth from 2023 to 2030. This is due to the growing investments by the manufacturers in designing research &  development and collaborating with the engineering service providers to construct advanced automobile features for the consumers. To balance power-to-weight ratios, manufacturers are emphasizing production of the vehicles with elongated and spacious interiors.

Location Insights

The on-shore segment accounted for the largest revenue share of around 60.0% of the overall market in 2023 and is expected to register the fastest growth in the forecast period. This is attributed to the emerging preference of OEMs to collaborate with locally available ESPs. This will help in avoiding the risk as many other countries do not follow intellectual property protection and copyright laws.

The challenges faced, such as different time zones, language barriers, imposed laws and regulations, and others, while dealing with ESPs from a foreign land, restrict OEMs to prefer outsourcing from other countries, leading to significant growth in demand for the on-shore segment. Also, the increased adoption of automation technology and self-serve solutions has encouraged automobile OEMs to seek assistance from on-shore engineering service firms.

The off-shore segment is expected to register significant growth in the forecast period. This is attributed to the emerging preferences of OEMs to outsource services from low-cost countries such as India, China, Brazil, Mexico, and Ukraine. With the most engineering graduates and appropriate skills compared to all other low-cost countries for ESO, India is majorly preferred by OEMs, driving growth in this region. Ukraine, in Eastern Europe, is also emerging as a provider of autonomous services, especially for American and European-based OEMs. This is due to the availability of many ESPs or their development centers in Ukraine for low-cost software development.

Regional Insights

The Asia Pacific regional market accounted for the largest revenue share of around 44.0% of the automotive ESO market in 2023 and is expected to continue its dominance in the market during the next eight years. This is attributed to the rapid adoption of electric passenger cars in China. The government's norms to minimize or reduce emissions and adopt green technology encourage the segment to grow in the forecast period.

Also, the emergence of ESPs in Asia Pacific is witnessed due to the availability of an economical and professional workforce. For instance, in May 2019, FEV Group GmbH expanded its operations in India by opening a new mobility center in Pune. The new mobility hub is expected to pave the path for breakthrough technology.

The South American region is anticipated to account for the fastest CAGR of more than 15.0% from 2023 to 2030. This is owing to the collaboration of OEMs in the region with government agencies to develop and expand hybrid and electric vehicles due to the emergence of vehicle charging infrastructure. In addition, the rising government initiatives and the increase in budget allocation fuel the region's growth.

The MEA region witnessed steady growth in 2023 due to automotive manufacturers' preference for outsourcing services to minimize cost and take subassembly and component production to suppliers. This supports the manufacturers in cutting down on the number of operations in the entire process.

Some of the prominent players in the automotive engineering services outsourcing market include:

• AKKA
• Altair Engineering Inc.
• Alten Group
• Altran (Cap Gemini Engineering)
• ARRK Product Development Group Ltd.
• ASAP Holding Gmbh
• AVL List GmbH
• Bertrandt AG
• EDAG Group
• ESG Elektroniksystem- und Logistik-GmbH
• FEV Group GmbH
• Horiba, LTD.
• IAV
• ITK Engineering GmbH Kistler Group
• P3 group GmbH
• RLE INTERNATIONAL Group

Segments Covered in the Report

This report forecasts revenue growth at global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2021 to 2033. For this study, Nova one advisor, Inc. has segmented the global automotive engineering services outsourcing market.

Application

• Autonomous Driving/ADAS
• Body & Chassis
• Powertrain and After-Treatment
• Infotainment & Connectivity
• Others

Service

• Designing
• Prototyping
• System Integration
• Testing
• Others

Location

• On-shore
• Off-shore

By Region

• North America
• Europe
• Asia-Pacific
• Latin America
• Middle East & Africa (MEA)