Automotive Engineering Service Provider Market Size, Share and Segmentation by Service Type (Concept/Research, Designing, Prototyping, System Integration, Testing), by Application (ADAS and Safety, Electrical, Electronics, and Body Controls, Chassis, Connectivity Services, Interior, Exterior, and Body Engineering, Powertrain and Exhaust, Simulation, Battery Development & Management, Charger Testing, Motor Control, Others), by Location (In-house, Outsourced), by Regions and Global Market Forecast 2024-2031

Automotive Engineering Service Provider Market Report Scope & Overview:

The Automotive Engineering Service Provider Market size was valued at USD 166.70 billion in 2023 and is expected to reach USD 324.27 billion by 2031 and grow at a CAGR of 8.79% over the forecast period 2024-2031.

• How the current government initiatives are positively shaping the market course?

The Automotive Engineering Service Provider (ESP) market is undergoing significant transformation driven by several key trends. The rising demand for electric vehicles (EVs) is driving opportunities for ESPs specializing in battery technology, powertrain design, and lightweight material integration. Government initiatives, such as China's substantial investment in EV charging infrastructure and the US's support for domestic battery production, are further accelerating this shift. For instance, U.S. claimed the investments plan of $3.1 Bn for domestic battery production. Global emission regulations are becoming increasingly stringent, creating a growing demand for ESPs proficient in optimizing internal combustion engines (ICE) and developing cleaner technologies like hybrids.

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Moreover, the emergence of the autonomous vehicle (AV) sector is creating a need for ESPs with expertise in sensor fusion, LiDAR integration, and path planning. This presents a lucrative niche for ESPs with these capabilities. To thrive in this evolving landscape, ESPs must continually refine their skill sets and invest significantly in research and development (R&D). Adapting and innovating at the forefront of automotive transformation is crucial for capitalizing on the opportunities presented by this dynamic market.

MARKET DYNAMICS:

KEY DRIVERS:

• Vehicle electrification and digitization, which are on the rise, are projected to drive the market's growth.

• Advanced connectivity solutions are in high demand.

• The pace of automotive innovation is quickening as technology advances.

• Improving the density of power and minimizing the use of power.

Efficient lightweight material engineering and aerodynamic optimization are becoming increasingly critical in minimizing a vehicle's energy consumption. Government incentives such as India's FAME II scheme, which provides subsidies for electric two-wheelers demonstrating superior energy efficiency, are driving the market towards this direction. By addressing both aspects of the equation, automotive engineering service providers will play a pivotal role in shaping a future where electric vehicles not only boast extended range but also deliver unmatched efficiency.

RESTRAINTS:

• Standard guidelines for engineering service providers are lacking.

• The increased level of design complexity has an impact on the final price of the vehicle.

OPPORTUNITIES:

• Advancements in the field of autonomous and semi-autonomous transportation.

• There is adequate room for this market to grow as the economy improves.

• The standardization of safety features could be an excellent potential for this business.

The future prospects of the Automotive Engineering Service Provider (AESP) market are intricately linked with the burgeoning adoption of standardized safety features within the automotive industry. As governments worldwide prioritize road safety, the implementation of regulations mandating advanced safety technologies such as Automatic Emergency Braking (AEB) and Electronic Stability Control (ESC) is becoming increasingly pervasive. Notably, the European Union's General Safety Regulation stands as a testament to this trend, with projections indicating potential savings of over 25,000 lives by 2038.

CHALLENGES:

• System manufacturers, OEMs, and engineering service providers face major security challenges.

• IP restrictions prevent service providers from frequently employing technology.

IMPACT OF RUSSIA-UKRAINE WAR:

The ongoing conflict in Ukraine is significantly impacting the Automotive Engineering Service Provider (ESP) market, prompting major automakers to halt production due to disruptions in the supply chain, particularly for critical components such as wiring harnesses commonly sourced from Ukraine. This immediate disruption is anticipated to catalyze a broader, long-term trend toward near-shoring and supplier diversification as automotive companies seek to mitigate geopolitical risks.

In response to these challenges, governments are expected to play a pivotal role in facilitating the reshaping of the industry. For instance, the European Union has unveiled a €2 billion ($2.2 billion) investment plan aimed at strengthening domestic semiconductor production, a key component facing global shortages. Similarly, the Indian government has earmarked ₹76,000 crore ($10 billion) to incentivize investments in the electric vehicle (EV) sector, with the goal of establishing a resilient local EV supply chain.

These governmental initiatives, combined with the automotive industry's own initiatives to bolster self-reliance, are poised to redefine the landscape of ESPs. The market is anticipated to experience heightened demand for service providers proficient in localization strategies, supply chain optimization, and electric vehicle engineering. While the precise magnitude and contours of this transformation remain uncertain, it is evident that the conflict in Ukraine has initiated a fundamental shift in the Automotive ESP market, emphasizing resilience and regionalization as key imperatives.

IMPACT OF ECONOMIC SLOWDOWN:

The Automotive Engineering Service Provider (ESP) market faces challenges amid an economic slowdown, with a projected 15% decline in car sales impacting budgets across the automotive industry. Consequently, engineering projects are being postponed or cancelled, resulting in decreased demand for ESP services. However, there are promising developments amidst these challenges. Governments, recognizing the significance of the automotive sector, are intervening.

Notably, the Chinese government injected $38 billion USD in 2022 to bolster electric vehicle (EV) development, presenting opportunities for ESPs specializing in EV technologies. Furthermore, stringent safety regulations and the advancement of autonomous driving features continue to necessitate engineering expertise, even amidst economic downturns. While short-term prospects may indicate a reduction in demand, ESPs that adeptly adapt to these shifting dynamics can effectively navigate the economic slowdown and emerge resilient.

Market, By Service Type:

The future prospects of the automotive engineering service provider market depend on adopting a segmented strategy that caters to distinct stages of development. The Concept/Research segment, though currently smaller in scale, is anticipated to experience significant expansion with a projected investment surge of 20% by 2025. This growth is driven by heightened innovation priorities among automakers, particularly in areas such as electric vehicles and autonomous driving technologies.

Meanwhile, Design services, which presently command the largest market share at 35%, are forecasted to sustain consistent growth. This is fueled by the ongoing demand for vehicles that are both lightweight and visually appealing. Prototyping services, essential for validating designs, are expected to see a 15% increase in investments, propelled by the increasing accessibility of technologies such as 3D printing and rapid prototyping. System integration, which ensures smooth interaction among components, is anticipated to maintain a stable 20% market share. Similarly, the Testing segment, encompassing virtual simulations and real-world trials, is projected to witness a 10% upsurge, driven by the escalating focus on safety and performance standards. This targeted approach to services will be critical for engineering firms to leverage the evolving automotive landscape and capitalize on emerging opportunities in the market.

Market, By Application:

The path of the Automotive Engineering Service Provider Market relies heavily on the intricate dynamics across various application segments. The foremost contender, Advanced Driver-Assistance Systems (ADAS) and Safety, is poised to dominate, primarily fueled by stringent regulatory measures and the intensifying pursuit of autonomous driving technologies. Industry projections indicate that ADAS & Safety will command a significant share, exceeding 25% of the market by 2031, as per a SNS Insider analysis.

Conversely, the advent of Electric Vehicles (EVs) is reshaping the landscape, propelling segments such as Battery Development & Management and Charger Testing into a notable growth trajectory. These segments are anticipated to collectively amass a considerable share, potentially reaching 15% by 2031. In contrast, traditional segments like Powertrain & Exhaust are expected to witness a decline, while Chassis and Connectivity Services are slated for consistent growth owing to their enduring relevance across diverse vehicle categories. Amidst this evolution, there emerge compelling prospects for engineering service providers adept at adapting their competencies to meet the evolving demands of the automotive industry. Seizing upon these opportunities necessitates agility and innovation, positioning firms to capitalize on the shifting preferences and priorities within the automotive sector.

Market, By Location:

The automotive engineering service provider market is bifurcated into two primary segments based on service location: in-house and outsourced. As of 2023, the in-house segment boasted a commanding market share of approximately 67%. This predominance can be attributed to the clustering of service providers around original equipment manufacturers (OEMs) in developed nations, fostering tight-knit collaboration for design, prototyping, and specialized tasks. Nonetheless, projections suggest a forthcoming power shift in the industry landscape.

The outsourced segment, currently holding a 33% market share, is witnessing rapid expansion propelled by several key factors. The escalating intricacy of vehicles, propelled by advancements in electric, autonomous, and connected car technologies, demands specialized expertise often beyond in-house capabilities. This trend underscores the growing significance of outsourced automotive engineering services in meeting the evolving demands of the market.

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MARKET SEGMENTATION:

By Service Type:

• Concept/Research

• Designing

• Prototyping

• System Integration

• Testing

By Application:

• ADAS and Safety

• Electrical, Electronics, and Body Controls

• Chassis

• Connectivity Services

• Interior, Exterior, and Body Engineering

• Powertrain and Exhaust

• Simulation

• Battery Development & Management

• Charger Testing

• Motor Control

• Others 

By Location:

• In-house

• Outsource

REGIONAL ANALYSIS:

The landscape of the Automotive Engineering Service Provider Market is undergoing a significant transformation, marked by the emergence of regional leaders alongside established industry giants. Presently, Europe commands the largest market share at approximately 38%, leveraging its strong automotive manufacturing heritage and emphasis on cutting-edge technologies. However, the Asia Pacific region is poised for remarkable growth, projected to capture a commanding 48% share by 2031. This growth trajectory is driven by factors such as China's swift adoption of electric vehicles and governmental backing for eco-friendly technologies. Despite being a mature market, North America is expected to maintain a steady 20% share, propelled by ongoing advancements in autonomous driving and connected vehicle solutions. This shift towards regional diversification presents lucrative opportunities for service providers. Companies possessing a global footprint and specialized expertise in meeting diverse market demands will be strategically positioned to capitalize on these emerging trends and thrive in the foreseeable future.

REGIONAL COVERAGE:

• North America

  • The USA

  • Canada

  • Mexico

• Europe

  • Germany

  • The UK

  • France

  • Italy

  • Spain

  • The Netherlands

  • Rest of Europe

• Asia-Pacific

  • Japan

  • south Korea

  • China

  • India

  • Australia

  • Rest of Asia-Pacific

• The Middle East & Africa

  • Israel

  • UAE

  • South Africa

  • Rest of Middle East & Africa

• Latin America

  • Brazil

  • Argentina

  • Rest of Latin America

KEY PLAYERS:

Robert Bosch GmbH (Germany), Continental AG (Germany), HARMAN International (USA), AVL LIST GmbH (Germany), Bertrandt (Germany), EDAG Engineering GmbH (Germany), Imaginative Automotive Engineering Services (India), IAV Automotive Engineering, Inc. (Germany), Magna International Inc (Canada), and Contechs (UK) are some of the affluent competitors with significant market share in the Automotive Engineering Service Provider Market.

Recent Developments:

1. Bosch Engineering: Bosch Engineering, a subsidiary of Robert Bosch GmbH, has been involved in various automotive engineering projects. They have focused on developing advanced driver assistance systems (ADAS), automotive electronics, and software solutions for vehicle control systems.

2. Magna International: Magna International is a global automotive supplier known for its expertise in engineering services. They have been active in developing lightweight vehicle structures, electric vehicle components, and advanced manufacturing processes aimed at improving efficiency and sustainability in the automotive industry.

3. EDAG Engineering: EDAG Engineering is a leading provider of engineering services for the automotive industry. They have worked on innovative vehicle concepts, including electric and autonomous vehicles, and have expertise in vehicle integration, prototyping, and testing.

Bertrandt (Germany)-Company Financial Analysis