Automotive Engineering Services Outsourcing (ESO) Market (Updated Version Available)
Automotive Engineering Services Outsourcing (ESO) Market Size, Share & Trends Analysis, By Service Type (Designing, Prototyping, System Integration, and Testing), Location Type (On-Shore and Off-Shore), Vehicle Type (Passenger and Commercial), Engine Type (IC Engine and Electric Engine), Application (Autonomous Driving, Powertrain and After-Treatment, Infotainment & Connectivity, and Others), By Region, Forecast Period 2023 - 2030
Report ID : RI_474245 | Date : April 2023 |
Format : 
Key Market Overview:
Automotive Engineering Services Outsourcing (ESO) Market is estimated to reach over USD 350.70 Billion by 2030 from a value of USD 191.79 Billion in 2022, growing at a CAGR of 7.84% from 2023 to 2030.
Automotive engineering services outsourcing refers to the practice of outsourcing various engineering services related to the automotive industry to third-party service providers. Automotive companies tend to reduce development costs while maintaining high-quality standards by outsourcing these services and benefit from the expertise of specialized service providers. The outsourcing of automotive engineering services such as product design, development, testing, and validation has become increasingly popular in order to improve the product development processes, reduce costs, and bring better products to market more quickly.
The growing demand for advanced technologies, such as connected cars and advanced driver assistance systems (ADAS), is driving the need for engineering services related to software development and connectivity. Such advanced systems has led to an increase in outsourcing of engineering services to service providers. For instance, in March 2023, ON Semiconductor announced that it will integrate its silicon carbide (SiC) technology in BMW Groups next-generation electric vehicles (EVs). Therefore, outsourcing engineering services allows automotive companies to focus on their core competencies and areas of expertise, thereby driving the growth of automotive engineering services outsourcing market.
Automotive Engineering Services Outsourcing (ESO) Report Coverage:
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Market Dynamics:
Driver:
Automotive engineering service providers have the expertise and resources to invest in the latest technologies such as ADAS systems, automation, and AI-based systems that helps companies to fasten the product development process. Therefore, partnerships with automotive service providers help companies to reduce costs associated with automotive manufacturing thereby accelerating the growth of the global market. Furthermore, advancements in technology, such as 5G, artificial intelligence, and the Internet of Things (IoT), are driving the development of new and innovative automotive vehicles. Service providers are well-positioned to help companies design and manufacture these products, contributing to the growth of automotive engineering services outsourcing (ESO) market.
Restraint:
Automotive engineering services outsourcing is quite expensive, particularly for complex services that require specialized skills and expertise. The cost of outsourcing is a significant barrier for small and medium-sized enterprises (SMEs) lacking financial resources to outsource their engineering services. Furthermore, outsourcing engineering services raise concerns about data security and confidentiality. As a result, automotive manufacturers and suppliers are reluctant to share sensitive information with third-party service providers, thereby limiting the growth of automotive engineering services outsourcing market.
Opportunities:
The rising adoption of electric vehicles provides potential growth opportunities for the automotive engineering services (EMS) market during the upcoming period. The surge in production of electric vehicles is leading to an increase in demand for advanced electronics including batteries, power electronics, and control systems. Additionally, the service providers play a crucial role in providing the required manufacturing and engineering services to support the development of these advanced electronics. Furthermore, the development of electric vehicle charging infrastructure is also expected to create new opportunities for service providers to design and install charging stations.
Automotive Engineering Services Outsourcing (ESO) Market Competitive Landscape:
The market for the automotive engineering services outsourcing is highly competitive with major players adopting strategies for mergers and acquisitions, and product innovations to stay competitive in the market. Following are the major market players that comprise the latest market concentration–
• AKKA
• Altair Engineering Inc.
• Alten Group
• Altran (Cap Gemini Engineering)
• ASAP Holding Gmbh
• AVL List GmbH
• Bertrandt AG
• EDAG Group
• FEV Group GmbH
• RLE INTERNATIONAL Group
Recent Developments:
• In February 2022, KPIT and Coventry University partnered to launch Masters of Technology course for KPIT employees in India.
• In January 2023, VVDN strengthens its services portfolio with the addition of Automotive Engineering and Manufacturing Services for global markets.
Automotive Engineering Services Outsourcing (ESO) Market Segmentation:
By Service Type
Based on the service type, the market is segregated into designing, prototyping, system integration, and testing. The prototyping segment accounted for the largest revenue share in 2022. Prototyping allows companies to quickly develop and test new vehicle or component designs, thereby reducing the time to bring a new product to market. Moreover, prototyping is a cost-effective way to develop and design new designs compared to traditional manufacturing methods. For instance, in July 2021, Stellantis launched the Stellantis Design Studio that brings together the companys design teams from across the globe, providing them with a collaborative environment to create new vehicle designs and concepts.
The testing segment is expected to emerge as the fastest growing segment during the forecast period due to the increasing complexity of automotive vehicles. Automotive products are becoming increasingly complex with a growing number of features and functions. Therefore, the increasing complexity requires extensive testing to ensure that products are safe, reliable, and meet regulatory requirements.
By Location Type
Based on the location type, the market is bifurcated into on-shore and off-shore. The on-shore segment accounted for the largest revenue share in the year 2022. On-shore outsourcing allows for close collaboration between the automotive company and service provider due to their proximity within the same country. Moreover, government restrictions on imports and exports of automotive products is further contributing to the growth of this segment.
The off-shore segment is expected to witness fastest CAGR growth during the forecast period is due to the low labor costs for manufacturing purposes. Service providers located in countries such as India, China, and the Philippines offer engineering services at a significantly lower cost, thereby driving the growth of off-shore segment. Moreover, off-shore service providers offer access to specialized expertise that are not available locally in the same country. Therefore, companies are provided with significant cost savings for services that are not available locally, further contributing to the growth of the market.
By Vehicle Type
Based on the vehicle type, the market is bifurcated into passenger and commercial vehicle. The passenger vehicle segment accounted for the maximum revenue share in the year 2022. The growth of this segment is driven by factors such as the increasing demand for electric and hybrid vehicles, advancements in autonomous driving technologies, and the need for improved safety and connectivity features. The passenger vehicle segment of the automotive engineering services outsourcing market includes engineering services for cars, SUVs, and other personal vehicles.
The commercial segment is expected to register fastest CAGR during the forecast period. The growth of this segment is driven by factors such as the increasing demand for fuel-efficient and eco-friendly vehicles and the need for improved safety features and regulatory compliance. The commercial vehicle segment includes engineering services for trucks, buses, and other commercial vehicles that are expected to be in high demand during the forecast period.
By Engine Type
Based on the engine type, the market is divided into IC engine and electric engine. The IC engine segment dominates the global market and accounted for the largest revenue share in the year 2022. The IC engine segment includes various services related to engine design and development, powertrain development, emission testing, and engine performance testing. Therefore, continuous growth in the automotive industry help manufacturers and suppliers to meet regulatory requirements and improve engine performance and fuel efficiency.
The electric engine segment is expected to witness fastest growth during the forecast period. The demand for electric vehicles is growing as consumers become more aware of the environmental benefits of EVs. Advances in battery technology are making electric vehicles more affordable with longer ranges and shorter charging times. As a result, manufacturers and suppliers seek automotive engineering services to develop high-performance and reliable electric powertrains.
By Application
Based on the application, the market is segregated into autonomous driving, powertrain and after-treatment, infotainment & connectivity, and others. The powertrain and after-treatment method accounted for the largest revenue share in the year 2022 due to the need for increased efficiency and improved performance capabilities of automotive products. The Powertrain and After-Treatment segment includes engineering services for the engine, transmission, and exhaust systems of vehicles, thereby enhancing the overall performance of automotive vehicles.
The autonomous driving segment is expected to witness fastest CAGR growth during the forecast period due to the increasing demand for advanced safety and convenience features as well as seamless connectivity between vehicles and other devices. Autonomous driving technology has the potential to improve road safety by reducing the likelihood of accidents on roads. As a result, there is a growing demand for engineering services that help to develop and test autonomous driving technology, ensuring safety standards and regulations. For instance, in March 2023, May Mobility announced the launch of its third-generation autonomous driving system designed to be more reliable, efficient, and safe than previous versions.
By Region:
Asia-Pacific dominates the global market and accounted for the largest revenue share in the year 2022. The Asia-Pacific region is the center of some of the fastest-growing automotive industries in the world, including China, India, and Japan countries. This growth of automotive industry in the region is driving the demand for automotive engineering services, as original equipment manufacturers (OEMs) and suppliers seek to innovate and develop new technologies to meet the evolving needs of consumers.
Moreover, the region is witnessing significant advancements in technologies such as autonomous driving, electric vehicles, and connectivity, further driving the demand for automotive engineering services in the region. Furthermore, Asia-Pacific is the fastest growing segment during the forecast period. The Asia Pacific region has a large pool of highly skilled engineers and technicians providing engineering services for a lower cost than in other regions.
Automotive Engineering Services Outsourcing (ESO) Market is estimated to reach over USD 350.70 Billion by 2030 from a value of USD 191.79 Billion in 2022, growing at a CAGR of 7.84% from 2023 to 2030.
Automotive engineering services outsourcing refers to the practice of outsourcing various engineering services related to the automotive industry to third-party service providers. Automotive companies tend to reduce development costs while maintaining high-quality standards by outsourcing these services and benefit from the expertise of specialized service providers. The outsourcing of automotive engineering services such as product design, development, testing, and validation has become increasingly popular in order to improve the product development processes, reduce costs, and bring better products to market more quickly.
The growing demand for advanced technologies, such as connected cars and advanced driver assistance systems (ADAS), is driving the need for engineering services related to software development and connectivity. Such advanced systems has led to an increase in outsourcing of engineering services to service providers. For instance, in March 2023, ON Semiconductor announced that it will integrate its silicon carbide (SiC) technology in BMW Groups next-generation electric vehicles (EVs). Therefore, outsourcing engineering services allows automotive companies to focus on their core competencies and areas of expertise, thereby driving the growth of automotive engineering services outsourcing market.
Automotive Engineering Services Outsourcing (ESO) Report Coverage:
| Report Attributes | Report Details |
| Study Timeline | 2017-2030 |
| Market Size in 2030 (USD Billion) | USD 350.70 Billion |
| CAGR (2023-2030) | 7.84 % |
| Base Year | 2022 |
| By Service Type | Designing, Prototyping, System Integration, and Testing |
| By Location Type | On-Shore and Off-Shore |
| By Vehicle Type | Passenger and Commercial |
| By Engine Type | IC Engine and Electric Engine |
| By Application | Autonomous Driving, Powertrain and After-Treatment, Infotainment & Connectivity, and Others |
| By Geography |
|
| Key Players | AKKA, Altair Engineering Inc., Alten Group, Altran (Cap Gemini Engineering), ASAP Holding Gmbh, AVL List GmbH, Bertrandt AG, EDAG Group, FEV Group GmbH, RLE INTERNATIONAL Group |
Market Dynamics:
Driver:
Automotive engineering service providers have the expertise and resources to invest in the latest technologies such as ADAS systems, automation, and AI-based systems that helps companies to fasten the product development process. Therefore, partnerships with automotive service providers help companies to reduce costs associated with automotive manufacturing thereby accelerating the growth of the global market. Furthermore, advancements in technology, such as 5G, artificial intelligence, and the Internet of Things (IoT), are driving the development of new and innovative automotive vehicles. Service providers are well-positioned to help companies design and manufacture these products, contributing to the growth of automotive engineering services outsourcing (ESO) market.
Restraint:
Automotive engineering services outsourcing is quite expensive, particularly for complex services that require specialized skills and expertise. The cost of outsourcing is a significant barrier for small and medium-sized enterprises (SMEs) lacking financial resources to outsource their engineering services. Furthermore, outsourcing engineering services raise concerns about data security and confidentiality. As a result, automotive manufacturers and suppliers are reluctant to share sensitive information with third-party service providers, thereby limiting the growth of automotive engineering services outsourcing market.
Opportunities:
The rising adoption of electric vehicles provides potential growth opportunities for the automotive engineering services (EMS) market during the upcoming period. The surge in production of electric vehicles is leading to an increase in demand for advanced electronics including batteries, power electronics, and control systems. Additionally, the service providers play a crucial role in providing the required manufacturing and engineering services to support the development of these advanced electronics. Furthermore, the development of electric vehicle charging infrastructure is also expected to create new opportunities for service providers to design and install charging stations.
Automotive Engineering Services Outsourcing (ESO) Market Competitive Landscape:
The market for the automotive engineering services outsourcing is highly competitive with major players adopting strategies for mergers and acquisitions, and product innovations to stay competitive in the market. Following are the major market players that comprise the latest market concentration–
• AKKA
• Altair Engineering Inc.
• Alten Group
• Altran (Cap Gemini Engineering)
• ASAP Holding Gmbh
• AVL List GmbH
• Bertrandt AG
• EDAG Group
• FEV Group GmbH
• RLE INTERNATIONAL Group
Recent Developments:
• In February 2022, KPIT and Coventry University partnered to launch Masters of Technology course for KPIT employees in India.
• In January 2023, VVDN strengthens its services portfolio with the addition of Automotive Engineering and Manufacturing Services for global markets.
Automotive Engineering Services Outsourcing (ESO) Market Segmentation:
By Service Type
Based on the service type, the market is segregated into designing, prototyping, system integration, and testing. The prototyping segment accounted for the largest revenue share in 2022. Prototyping allows companies to quickly develop and test new vehicle or component designs, thereby reducing the time to bring a new product to market. Moreover, prototyping is a cost-effective way to develop and design new designs compared to traditional manufacturing methods. For instance, in July 2021, Stellantis launched the Stellantis Design Studio that brings together the companys design teams from across the globe, providing them with a collaborative environment to create new vehicle designs and concepts.
The testing segment is expected to emerge as the fastest growing segment during the forecast period due to the increasing complexity of automotive vehicles. Automotive products are becoming increasingly complex with a growing number of features and functions. Therefore, the increasing complexity requires extensive testing to ensure that products are safe, reliable, and meet regulatory requirements.
By Location Type
Based on the location type, the market is bifurcated into on-shore and off-shore. The on-shore segment accounted for the largest revenue share in the year 2022. On-shore outsourcing allows for close collaboration between the automotive company and service provider due to their proximity within the same country. Moreover, government restrictions on imports and exports of automotive products is further contributing to the growth of this segment.
The off-shore segment is expected to witness fastest CAGR growth during the forecast period is due to the low labor costs for manufacturing purposes. Service providers located in countries such as India, China, and the Philippines offer engineering services at a significantly lower cost, thereby driving the growth of off-shore segment. Moreover, off-shore service providers offer access to specialized expertise that are not available locally in the same country. Therefore, companies are provided with significant cost savings for services that are not available locally, further contributing to the growth of the market.
By Vehicle Type
Based on the vehicle type, the market is bifurcated into passenger and commercial vehicle. The passenger vehicle segment accounted for the maximum revenue share in the year 2022. The growth of this segment is driven by factors such as the increasing demand for electric and hybrid vehicles, advancements in autonomous driving technologies, and the need for improved safety and connectivity features. The passenger vehicle segment of the automotive engineering services outsourcing market includes engineering services for cars, SUVs, and other personal vehicles.
The commercial segment is expected to register fastest CAGR during the forecast period. The growth of this segment is driven by factors such as the increasing demand for fuel-efficient and eco-friendly vehicles and the need for improved safety features and regulatory compliance. The commercial vehicle segment includes engineering services for trucks, buses, and other commercial vehicles that are expected to be in high demand during the forecast period.
By Engine Type
Based on the engine type, the market is divided into IC engine and electric engine. The IC engine segment dominates the global market and accounted for the largest revenue share in the year 2022. The IC engine segment includes various services related to engine design and development, powertrain development, emission testing, and engine performance testing. Therefore, continuous growth in the automotive industry help manufacturers and suppliers to meet regulatory requirements and improve engine performance and fuel efficiency.
The electric engine segment is expected to witness fastest growth during the forecast period. The demand for electric vehicles is growing as consumers become more aware of the environmental benefits of EVs. Advances in battery technology are making electric vehicles more affordable with longer ranges and shorter charging times. As a result, manufacturers and suppliers seek automotive engineering services to develop high-performance and reliable electric powertrains.
By Application
Based on the application, the market is segregated into autonomous driving, powertrain and after-treatment, infotainment & connectivity, and others. The powertrain and after-treatment method accounted for the largest revenue share in the year 2022 due to the need for increased efficiency and improved performance capabilities of automotive products. The Powertrain and After-Treatment segment includes engineering services for the engine, transmission, and exhaust systems of vehicles, thereby enhancing the overall performance of automotive vehicles.
The autonomous driving segment is expected to witness fastest CAGR growth during the forecast period due to the increasing demand for advanced safety and convenience features as well as seamless connectivity between vehicles and other devices. Autonomous driving technology has the potential to improve road safety by reducing the likelihood of accidents on roads. As a result, there is a growing demand for engineering services that help to develop and test autonomous driving technology, ensuring safety standards and regulations. For instance, in March 2023, May Mobility announced the launch of its third-generation autonomous driving system designed to be more reliable, efficient, and safe than previous versions.
By Region:
Asia-Pacific dominates the global market and accounted for the largest revenue share in the year 2022. The Asia-Pacific region is the center of some of the fastest-growing automotive industries in the world, including China, India, and Japan countries. This growth of automotive industry in the region is driving the demand for automotive engineering services, as original equipment manufacturers (OEMs) and suppliers seek to innovate and develop new technologies to meet the evolving needs of consumers.
Moreover, the region is witnessing significant advancements in technologies such as autonomous driving, electric vehicles, and connectivity, further driving the demand for automotive engineering services in the region. Furthermore, Asia-Pacific is the fastest growing segment during the forecast period. The Asia Pacific region has a large pool of highly skilled engineers and technicians providing engineering services for a lower cost than in other regions.
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