Automotive Engineering Services Outsourcing Market Size By Service, By Location Type, By Vehicle Type, By Application, By Geographic Scope And Forecast

Automotive Engineering Services Outsourcing Market Size And Forecast

Automotive Engineering Services Outsourcing Market size was valued at USD 189.71 Billion in 2024 and is projected to reach USD 1051.42 Billion by 2032, growing at a CAGR of 26.33% from 2026 to 2032.

Automotive Engineering Services Outsourcing (ESO) is the practice of contracting with external engineering firms to undertake specific areas of automotive design, development, and testing. This outsourcing enables automakers to tap into specialized expertise, cut expenses, and focus on their key skills, such as brand development and car design.

Furthermore, ESO provides a variety of services, including research and development, prototyping, system integration, and testing, all of which are crucial to the evolution of technology such as electric vehicles (EVs) and self-driving cars.

Automotive Engineering Services Outsourcing Market Dynamics

The key market dynamics that are shaping the automotive engineering services outsourcing market include:

Key Market Drivers

Increasing Complexity of Automotive Technologies: The rapid growth of electric vehicles, self-driving systems, and connected automobile technologies is increasing the demand for specific engineering knowledge. According to the International Energy Agency (IEA), electric vehicle sales reached 6.6 million in 2021, more than doubling from 2020 and tripling from 2019. This boom in innovative car technology is forcing manufacturers to seek external engineering assistance to meet innovation needs.

Focus on Core Competencies and Faster Time-to-market: Outsourcing non-essential engineering activities allows automotive businesses to focus on their core capabilities and shorten product development cycles. According to the Society of Motor Manufacturers and Traders (SMMT), the average time to market for new car models has fallen from 42 months in 2000 to around 24 months in recent years. This reduction is due in part to the efficient use of outsourced engineering services, which allows for speedier product introductions and better competitiveness.

Key Challenges:

Intellectual Property Concerns: The potential for intellectual property theft or misuse is a major limitation in the AESO market. When businesses outsource engineering tasks, they expose sensitive designs and proprietary technologies to third-party providers. This exposure increases the risk of leaks or unlawful use of intellectual property, which has serious legal and financial consequences for automotive manufacturers.

Quality Control Challenges: Maintaining consistent quality across outsourced engineering services is challenging. Automotive manufacturers confront hurdles in ensuring that third-party providers meet the same quality requirements as in-house teams. Variability in quality causes product failures, increased rework costs, and potential project timetable delays, all of which have an impact on the manufacturer's reputation and customer satisfaction.

Key Trends:

Rise of Electric and Autonomous Vehicles: The rising demand for electric cars (EVs) and self-driving technology is a prominent trend in the AESO market. As manufacturers focus on creating advanced driver assistance systems (ADAS), sensor integration, and software for self-driving cars, engineering service providers are being called upon to supply specific knowledge. This trend not only propels market expansion but also promotes innovation in vehicle design and functionality.

Integration of Software and Digital Engineering: With the increasing complexity of modern cars, there is a trend toward software and digital engineering services. Automotive manufacturers are rapidly outsourcing software development, testing, and integration to meet the demands of connected and autonomous vehicles. This trend emphasizes the importance of software in improving vehicle performance and user experience, resulting in increased reliance on engineering service providers for comprehensive digital solutions.

Outsourcing to Emerging Markets: The AESO market is experiencing a shift toward outsourcing engineering services to emerging economies, particularly Asia-Pacific. Countries such as India and China have low labor costs and a competent workforce, making them appealing options for automakers trying to cut costs while maintaining quality. This trend is projected to continue as businesses want to harness local expertise and resources to improve their technical capabilities and accelerate product development.

Automotive Engineering Services Outsourcing Market Regional Analysis

Here is a more detailed regional analysis of the automotive engineering services outsourcing market:

Asia Pacific:

According to Verified Market Research, the Asia Pacific region is estimated to dominate the market during the forecast period. The Asia Pacific region, particularly China and India, is experiencing major increases in car manufacturing and sales. According to the International Organization of Motor Vehicle Manufacturers (OICA), China built 26.08 million vehicles in 2021, accounting for 32.5% of total global vehicle production. India, the world's fourth largest auto market, saw passenger vehicle sales increase by 13.2% in 2021-22, hitting 3.07 million units. This rapid growth is increasing the demand for outsourced engineering services to support expanding manufacturing capabilities.

Furthermore, many Asian governments are implementing strategies to stimulate automotive R&D. For example, China's "Made in China 2025" project seeks to develop the country into a high-tech manufacturing powerhouse, focusing on new energy cars and intelligent linked vehicles. The initiative aims to increase new energy vehicle sales to 20% of overall vehicle sales by 2025. Similarly, India's Automotive Mission Plan 2016-26 seeks to establish India as a global hub for automotive R&D, with the sector expected to account for 12% of the country's GDP by 2026, up from 7.1% in 2016. These objectives are encouraging investments in automotive engineering services and creating a favorable climate for outsourcing.

North America:

North America is estimated to exhibit substantial growth within the market during the forecast period. The North American automotive market is rapidly adopting electric vehicles and developing autonomous technology, creating a demand for specialist engineering services. According to the US Department of Energy, EV sales in the United States surged by 85% between 2020 and 2021, reaching a record 608,000 units. Furthermore, the U.S. Bureau of Labor Statistics predicts that employment for automotive engineers will increase by 4% between 2020 and 2030, with a large percentage of this increase related to the development of EVs and driverless vehicles.

Furthermore, North American manufacturers are expanding their investments in lightweight materials and innovative production techniques to increase vehicle performance and efficiency. According to the U.S. Department of Energy's Vehicle Technologies Office, decreasing a vehicle's weight by 10% can increase fuel economy by 6-8%. According to the Aluminum Association, this concentration resulted in a 12% rise in the use of aluminum in North American automobiles between 2016 and 2020. The demand for knowledge in these new materials and manufacturing processes is driving the expansion of engineering services outsourcing in the region.

Europe:

Europe region is estimated to exhibit significant growth during the forecast period. Europe has enacted stringent CO2 emission limits, necessitating novel engineering solutions for car electrification. According to the European Environment Agency, average CO2 emissions from new passenger cars in the EU fell 12% in 2020 compared to 2019, to 107.8 g CO2/km. The rapid transition to low-emission vehicles has increased the demand for specialized engineering services in electric and hybrid powertrain development.

Furthermore, Europe is at the forefront of ADAS and self-driving technology deployment, demanding sophisticated engineering solutions. According to the European Commission, using ADAS technologies might avert 30% of all traffic fatalities by 2030. Also, according to research by the European Automobile Manufacturers Association (ACEA), 37.1% of new automobiles sold in the EU in 2020 included sophisticated safety features, up from 31.4% in 2019. This expanding trend is driving up the demand for specialist engineering services in the region.

Automotive Engineering Services Outsourcing Market: Segmentation Analysis

The Automotive Engineering Services Outsourcing Market is segmented based on Service, Location Type, Vehicle Type, Application, and Geography.

Automotive Engineering Services Outsourcing Market, By Service

• Designing
• Prototyping
• System Integration
• Testing
• Others

Based on Service, the market is segmented into Designing, Prototyping, System Integration, Testing, and Others. The designing segment is estimated to dominate the automotive engineering services outsourcing market due to the rising complexity of vehicle designs, which are being pushed by technological improvements and consumer desire for novel features. Designing services include a variety of operations such as idea creation, 3D modeling, and simulation, all of which are required to create modern automobiles. As manufacturers prioritize aesthetics, functionality, and sustainability, the demand for specialized design services grows, reinforcing the segment's global leadership position.

Automotive Engineering Services Outsourcing Market, By Location Type

• On-shore
• Off-shore

Based on Location Type, the automotive engineering services outsourcing market is segmented into On-shore and Off-shore. The off-shore segment is estimated to dominate the market over the forecast period due to the availability of low-cost labor and specialized engineering capabilities in Asia-Pacific, namely India and China. These countries have become popular destinations for automakers looking to cut operating costs while maintaining quality. The off-shore segment allows businesses to utilize global talent, increasing innovation and shortening product development cycles.

Automotive Engineering Services Outsourcing Market, By Vehicle Type

• Passenger Vehicles
• Commercial Vehicles

Based on Vehicle Type, the market is divided into Passenger Vehicles and Commercial Vehicles. The passenger vehicles segment is estimated to dominate the global market. This domination is fueled by the growing popularity of passenger vehicles, which are prized for their elegant designs, compact sizes, and economic value. Rising disposable incomes and altering customer preferences for personal transportation have resulted in tremendous sales growth, particularly in the electric vehicle market. The increased demand for sport utility vehicles (SUVs) boosts the segment's growth potential and solidifies its market leadership.

Automotive Engineering Services Outsourcing Market, By Application

• Autonomous Driving
• Body and Chassis
• Powertrain and After-treatment
• Infotainment and Connectivity
• Others

Based on Application, the market is segmented into Autonomous Driving, Body & Chassis, Powertrain & After-treatment, Infotainment & Connectivity, and Others. The autonomous driving segment is estimated to lead this segment in the forecast period. This dominance is fueled by significant advances in autonomous vehicle technology, such as advanced driver assistance systems (ADAS) and vehicle-to-everything (V2X) connectivity. As manufacturers focus more on integrating advanced software and sensor technologies, the demand for specialist engineering services in this area grows, adding significantly to the overall growth of the AESO market.

Automotive Engineering Services Outsourcing Market, By Geography

• North America
• Europe
• Asia Pacific
• Rest of the World

Based on Geography, the automotive engineering services outsourcing market is classified into North America, Europe, Asia Pacific, and the Rest of the World. The Asia Pacific region is estimated to dominate the automotive engineering services outsourcing market due to the increasing rise of the automobile sector in nations such as China and India, which have a high demand for cost-effective technical solutions. The region benefits from a huge pool of experienced engineers, competitive labor prices, and increased investments in automotive technologies, particularly electric and self-driving vehicles, which help to consolidate its market-leading position.

Key Players

• The "Automotive Engineering Services Outsourcing Market" study report will provide valuable insight with an emphasis on the global market. The major players in the market are Capgemini, IAV Automotive Engineering, Tech Mahindra, AKKA Technologies, and HCL Technologies.

Our market analysis also entails a section solely dedicated to such major players wherein our analysts provide an insight into the financial statements of all the major players, along with product benchmarking and SWOT analysis. The competitive landscape section also includes key development strategies, market share, and market ranking analysis of the above-mentioned players globally.

• Automotive Engineering Services Outsourcing Market Recent Developments
• In October 2023, Bertrand acquired Evopro Systems Engineering AG. Bertrand's acquisition broadens its service offerings, aligning with its company goal. In the future, the engineering service provider can give end-to-end production assistance to its customers.
• In November 2022, AVL completed a new vehicle engineering center with direct access to the proving field. The facility houses 150 professionals and has 1,340 m2 of workshop space, making it ideal for future mobility.
• Analyst's Take
• The Automotive Engineering Services Outsourcing Market is poised for robust growth driven by the escalating complexity of automotive technologies, stringent regulatory standards, and the increasing emphasis on innovation and cost optimization. Market players are witnessing a rising demand for engineering services outsourcing due to the need for expertise in areas such as electric and autonomous vehicles, connectivity, and advanced driver assistance systems (ADAS). Furthermore, the proliferation of digitalization and Industry 4.0 practices is fostering collaboration between automotive OEMs, Tier 1 suppliers, and engineering service providers.