Global Automotive Engineering Services Outsourcing Market by Service (Prototyping, Designing), by Location (Off-shore, On-shore) and Region (North America, Latin America, Europe, Asia Pacific and Middle East & Africa), Forecast To 2028

Summary of the Report

In 2019, the automotive outsourcing market was valued at USD 65.5 billion. It is projected to grow at a compound annual rate (CAGR of 27.8%) between 2020 and 2027. The market will be driven by the increasing technical capabilities of Engineering Service Providers, (ESPs), to offer R&D, product innovation, and vehicle positioning and connected cars. The market's overall revenue will be influenced by the sudden shift in OEM preferences for digitalized solutions over core and mechanical assistance.

The automotive industry is putting more emphasis on the manufacturing of automobiles that are connected to five key trends. ESO market players will be able to take advantage of this opportunity. Engineer support providers are focusing on providing solutions that support these trends to give their clients a competitive advantage. Altran, for instance, announced the availability of its fronthaul framework. It is run on Intel Field Programmable Gate Arrays and will aid both wireless carrier manufacturers and network equipment in aggregating large-scale 5G Fronthaul deployments.

Over the past two decades, de-verticalization has gained momentum. It is the process by which services and functions are separated from vertically integrated businesses. OEMs can transfer their product design and manufacturing to the ESPs in de-verticalization. This phenomenon has greatly benefited the automotive services outsourcing industry as it has allowed for a greater global supply base and new assembly plants. It has also led to the geographical expansion of ESO companies.

Modular outsourcing is also gaining popularity as manufacturers demand standardized interfaces that are integrated with self-contained functional units within their vehicles. Automotive OEMs can now outsource complex self-contained modules and also procure services for simpler parts.

However, some OEMs prefer to fabricate their end-products themselves at their main centers or captive locations rather than using ESPs because of the complexity of their engine designs, powertrain designs, and transmission systems. The OEMs have established their own manufacturing units in off-shore locations due to increasing concerns about the disclosure of complex automobile designs and intellectual property rights. The market is expected to grow despite the fact that the business model transformation where the manufacturer designs the product in-house will be a hindrance.

Application Insights

The market can be divided by application into autonomous driving/ADAS/body & chassis powertrain and after-treatment and infotainment and connectivity. In 2019, the powertrain and aftertreatment segment was the largest revenue share and will continue to lead the market for the next seven years. Automotive OEMs are expected to choose enhanced green powertrain technologies due to the radical changes in the sector, particularly in the Internal Combustion engines, in light of fuel economy and reduction in carbon emissions. Segment growth will be supported by the large investments that OEMs have made in powertrain technologies.

The body and chassis segment accounts for a large revenue share due to the preference for lighter chassis, which results in lower fuel emissions. Market growth is expected to be aided by the rising production of eco-friendly vehicles that comply with low emission norms. Over the next seven year, the market will be driven by an increasing focus on vehicle structure safety.

It is expected that the infotainment and connectivity segment will experience the highest growth, with a CAGR exceeding 31% between 2020-2027. The rise of connected cars is creating opportunities for automotive ESO firms. Many outsourcing companies offer advanced connectivity features to satisfy the growing demand for infotainment services and connectivity services. Harman International, for instance, launched the HARMANIgnite Marketplace, a cloud-based application network and solution that offers a wide range of solutions, including voice assistants, messaging apps, and other points-of-interest.

Service Insights

The market can be divided by service into design, prototyping and system integration. Testing is another segment. From 2020 to 2027, the designing segment will see the greatest CAGR at over 29%. To balance power-to-weight ratios, manufacturers are focusing on designing automobiles with spacious and long interiors. While OEMs don't usually outsource design solutions for vehicle performance such as electronic design and engine design, services in mechanical design are offshored to developing nations.

Outsourcing design services to OEMs in Japan, Germany, and the U.S. has been a huge benefit for countries like China and India. Automotive manufacturers are investing heavily in R&D and working with ESO companies to assemble complex automobile features for their customers. Designing is expected to grow due to the rising demand for cars with advanced aerodynamics and cosmetic LED technology.

Prototyping accounted for the largest revenue share in 2019, and will continue to lead the automotive engineering outsourcing market for the next seven years. Exorbitant costs are associated with the development of multiple prototypes before finalizing designs, and then processing mass production. OEMs have begun to associate with ESO companies in order to develop products at incubation centres set up by outsourcing companies, or in partnership with OEMs in various off-shore locations. This segment is also being driven by 3D modeling and printing to quickly prototype automobiles in pre-manufacturing stages.

Location Insights

The market can be divided into two types based on its location: on-shore or off-shore. On-shore outsourcing is the delivery of services to OEMs within legal limits. Off-shore outsourcing is the provision of outsourcing assistance to clients located in other countries. In 2019, the largest revenue share was held by the on-shore segment. It is expected to maintain its lead position, as the automotive ESO providers cluster around the OEMs of developed countries, particularly for prototyping and designing, in 2019.

Outsourcing from foreign-based ESPs poses security risks, as many of these countries are known for not adhering to IP protection copyright laws. The rapid adoption of automation technologies and self-service solutions has prompted automobile OEMs to seek out assistance from offshore engineering service providers. OEMs prefer ESPs based at their homes because of the language barriers, imposed regulations and reliability as well as communication in different time zones.

The OEMs, on the other hand, can leverage offshore outsourcing from low-cost nations such as India and China. Because of the availability and low cost of skilled professionals, engineering service providers are keen to establish delivery centers in these locations. The stringent regulatory requirements regarding political environment, diverse industry landscapes, and preferable structure of captive centres might make it difficult to effectively use off-shore resources.

Regional Insights

South America will experience the highest CAGR of 32% between 2020 and 2027. This is due to South American OEMs, based in Brazil and Argentina, who collaborate with the South American government to create hybrid and electric cars. The market will continue to grow due to increased budget allocations from the government to improve transport infrastructure in the region.

The Asia Pacific market was the largest revenue share in 2019, and it is expected to maintain its dominance for the next seven years. Major automobile OEMs have begun to outsource manufacturing and related activities to these countries due to cost-effective labor available in places like India, China, and the Philippines. Automotive ESO providers are moving their headquarters to the APAC region. Japan is now the world's largest car manufacturer, which presents growth opportunities for ESPs in APAC. Japan's government aims to increase sales of next-generation vehicles by 50%-70% until 2030. Hybrid Electric Vehicles should account for 30%-40%, while Plug-in Hybrid Electric Vehicles and Battery Electric Vehicles will make up 20-30%.

Europe will see significant growth as it is home to many major Tier 1 automotive manufacturers such as Daimler, Bosch and Volkswagen. The regional market will be driven by increased investments in electrification and autonomous technology. European ESPs offer technologically advanced solutions to their customers, giving them a competitive advantage in the market. Kistler Instrumente AG recently added RoaDyn S6GT to its wheel force measurement system. This allows for reliable and flexible measurements of wheel loads for off-highway and ultra-heavy commercial vehicles.

Market Share Insights & Key Companies

With the goal of expanding their client base and capabilities across all their locations, industry participants offer custom outsourcing solutions to OEMs. Alten teamed up with Syrphus GmbH in May 2019. Syrphus GmbH designs and manufactures unmanned autonomous aircraft and multicopter- and manned aviation vehicles. Alten provided support to the company's team with stress calculation, micromechanics and computer-aided designing, software and hardware, electrical installation and testing services. This helped develop hybrid aircraft that can take-off and land vertically as well as horizontally.

IAV GmbH formed a strategic partnership in July 2018 with Ziehl-Abegg Automotive GmbH & Co. KG, a vehicle component supplier, and Tassima AG, a body manufacturer for electrifying double-decker buses. M&A has been undertaken by companies to expand their service portfolio. Altran purchased Aricent, a global provider of engineering and integrated design services, in an effort to establish a strong position in the automotive and aerospace industries. The following are some of the most prominent players in Automotive ESO.

• Alten GmbH

• Altran Technologies S.A.

• HORIBA, Ltd.

• Bertrandt

• AVL List GmbH

Up Market Research published a new report titled “Automotive Engineering Services Outsourcing Market research report which is segmented by Service (Prototyping, Designing), by Location (Off-shore, On-shore), By Players/Companies AVL List GmbH, Altran Technologies SA, HORIBA Ltd, Bertrandt, Alten GmbH”. As per the study the market is expected to grow at a CAGR of XX% in the forecast period.

Report Scope

The report covers comprehensive data on emerging trends, market drivers, growth opportunities, and restraints that can change the market dynamics of the industry. It provides an in-depth analysis of the market segments which include products, applications, and competitor analysis.

Global Automotive Engineering Services Outsourcing Market Report Segments:

The market is segmented by Service (Prototyping, Designing), by Location (Off-shore, On-shore).

Automotive Engineering Services Outsourcing Market research report delivers a close watch on leading competitors with strategic analysis, micro and macro market trend and scenarios, pricing analysis and a holistic overview of the market situations in the forecast period. It is a professional and a detailed report focusing on primary and secondary drivers, market share, leading segments and geographical analysis. Further, key players, major collaborations, merger & acquisitions along with trending innovation and business policies are reviewed in the report.

Key Benefits for Industry Participants & Stakeholders:

• Industry drivers, restraints, and opportunities covered in the study
• Neutral perspective on the market performance
• Recent industry trends and developments
• Competitive landscape & strategies of key players
• Potential & niche segments and regions exhibiting promising growth covered
• Historical, current, and projected market size, in terms of value
• In-depth analysis of the Automotive Engineering Services Outsourcing Market

Overview of the regional outlook of the Automotive Engineering Services Outsourcing Market:

Based on region, the market is segmented into North America, Europe, Asia Pacific, Latin America and Middle East & Africa (MEA). North America region is further bifurcated into countries such as U.S., and Canada. The Europe region is further categorized into U.K., France, Germany, Italy, Spain, Russia, and Rest of Europe. Asia Pacific is further segmented into China, Japan, South Korea, India, Australia, South East Asia, and Rest of Asia Pacific. Latin America region is further segmented into Brazil, Mexico, and Rest of Latin America, and the MEA region is further divided into GCC, Turkey, South Africa, and Rest of MEA.

Highlights of The Automotive Engineering Services Outsourcing Market Report:

1. The market structure and projections for the coming years.
2. Drivers, restraints, opportunities, and current trends of Automotive Engineering Services Outsourcing Market.
3. Historical data and forecast.
4. Estimations for the forecast period 2028.
5. Developments and trends in the market.

                1. Prototyping

                2. Designing

                1. Off-shore

                2. On-shore

8. Market scenario by region, sub-region, and country.
9. Market share of the market players, company profiles, product specifications, SWOT analysis, and competitive landscape.
10. Analysis regarding upstream raw materials, downstream demand, and current market dynamics.
11. Government Policies, Macro & Micro economic factors are also included in the report.

We have studied the Automotive Engineering Services Outsourcing Market in 360 degrees via. both primary & secondary research methodologies. This helped us in building an understanding of the current market dynamics, supply-demand gap, pricing trends, product preferences, consumer patterns & so on. The findings were further validated through primary research with industry experts & opinion leaders across countries. The data is further compiled & validated through various market estimation & data validation methodologies. Further, we also have our in-house data forecasting model to predict market growth up to 2028.

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Reasons to Purchase the Automotive Engineering Services Outsourcing Market Report:

• The report includes a plethora of information such as market dynamics scenario and opportunities during the forecast period
• Segments and sub-segments include quantitative, qualitative, value (USD Million,) and volume (Units Million) data.
• Regional, sub-regional, and country level data includes the demand and supply forces along with their influence on the market.
• The competitive landscape comprises share of key players, new developments, and strategies in the last three years.
• Comprehensive companies offering products, relevant financial information, recent developments, SWOT analysis, and strategies by these players.