Automotive Engineering Services Market Size, Share & Industry Analysis, By Type (Mechanical, Embedded, and Software), By Application (Body Engineering, Chassis Engineering, Powertrain Engineering, Safety Systems, Infotainment Systems, and Others), By Location (In-house and Outsource), and Regional Forecasts, 2024-2032

The global automotive engineering services market size was valued at USD 20.23 billion in 2023. The market is projected to grow from USD 21.34 billion in 2024 to USD 36.15 billion by 2032, exhibiting a CAGR of 6.8% during the forecast period.

Automotive engineering services are mainly used in developing, designing, and prototyping automotive parts. Also, system integration and virtual testing and production of passenger cars and commercial vehicles are covered under these services. The global COVID-19 pandemic has been unprecedented and staggering, with automotive engineering services experiencing lower-than-anticipated demand across all regions compared to pre-pandemic levels. Based on our analysis, the global market exhibited a decline of 4.59% in 2020 as compared to 2019.

These services are intended to improve manufacturing and reduce additional expenditure. It consists of services, including analyzing, developing, designing prototyping system integration and testing a particular system or vehicle parts from the concept stage to the actual production stage. It comprises three main functions, production, development, and manufacturing. The service type may be related to mechanical, safety, software, electrical electronics and body controls, and interior exterior and body engineering solutions to design automobiles. These engineering solutions optimize the manufacturing process to improve the company’s operational cycle without compromising the vehicle’s quality.

Automotive Engineering Services Market Trends

Rise in Development of Autonomous Vehicles to Drive the Market Growth

Autonomous vehicles are also denoted as self-driving cars or driverless cars. The vehicle is integrated with a combination of sensors, actuators, a machine learning system, and complex and powerful algorithms to help execute software and provide transit service without any human input. Services such as ADAS, artificial intelligence-based connectivity services, electrical, electronics and body electronics, and many others are integrated into an autonomous vehicle. Thus, the development and adoption of autonomous vehicles are expected to fuel the market growth of automotive engineering services during the forecast period.

Autonomous vehicles are in line for the future of mobility services. Due to the varied applications of autonomous vehicles, the demand for the adoption and development of these types of cars has been developing and setting the trend over the years, creating a lucrative demand for the services market. Major companies are focused on developing autonomous vehicles using suitable automated services required along with connected services.

• For instance, Volvo, a leading automotive manufacturer in autonomous and connected car technology services, is focused on developing its vehicle with the recent advanced technologies and services. In January 2022, the company introduced autonomous technology services in its all-electric vehicle X90. The unsupervised autonomous vehicle function is called Ride Pilot.

Automotive Engineering Services Market Growth Factors

Rising Demand for Connected Services in Automotive to Drive Market Growth

Connected services incorporated into automotive allow customers to remotely monitor and control their car using the manufacturer's mobile app. The user can easily detect their cars' location with the help of this phone. The user can also check the vehicle's mileage, unlock the doors, and preheat the battery using connected services technology. The connected services differ with different automotive manufacturers with dedicated mobile applications and functionalities. For instance, Audi has a connected service called Audi Connect and their mobile app is called my Audi.

Therefore, the development of connected services, according to the OEM's requirements, is set to fuel the automotive engineering services market growth in the forecast period. Some of the connected services with mobile are listed in the table below. Companies such as WirelessCar are focusing on speeding the development of connected vehicle features.

• In July 2022, the WirelessCar, with the help of Polester is working on Android Automotive Operating System. With the help of this, WirelessCar introduced connected data services such as Journey Log, storing data in the WirelessCar cloud with all the track details of each ride taken. With the help of Polester, WirelessCar will focus on accelerating the development of connected technology that will help drive the market growth of automotive engineering services.

RESTRAINING FACTORS

Security Threats in Modern Vehicles to Restrain the Market

Increasing integration of computer-related technologies offered with connected and automated services provide a wide range of features and services. Along with this, the threat of malicious attacks also increases, resulting in vehicle-controlled systems causing failure and malfunctioning operations that can be severe. Ensuring the safety of such vehicles with electronic and electric architecture and components hinders the market growth of automotive engineering services. The concept of a connected car creates a new risk with the connection and interaction of the vehicle with a number of devices across the world. Although the OEMs are working on strengthening the connection's security, the security risk is increasing with new and advanced systems.

The automotive industry is raising its dependency on computer technologies to provide improved performance and several advanced features. Therefore, the growth of vehicle connectivity leads to increased security constraints that can impact the vehicle's functionality, thus restraining the market growth. However, key players are focusing on developing security features to provide better safety and security to the vehicle and owner by hackers and theft. Governments of several countries, along with international standardization bodies, are working on minimizing the threats related to automotive cyber security.

Automotive Engineering Services Market Segmentation Analysis

By Type Analysis

Mechanical Systems' Broad Scope and Requirements to Drive Market Growth

By type, the market is segmented into mechanical, embedded, and software.

Currently, the mechanical segment is dominating and is expected to dominate in 2032. The segment's growth can be attributed to the highly competitive nature of the automotive industry; by utilizing prototyping techniques in mechanical manufacturing-related services, manufacturers can achieve accurate results in shorter production times, thereby reducing excess costs. Given the ongoing trend of end-user convenience, automobile manufacturers are investing in advancing their production habits to match the ongoing trend, which is why the mechanical type is expected to dominate in the future.

Software is the fastest-growing segment with the highest CAGR in the market. Increasing penetration of software based applications in vehicles is further expected to drive the growth of this segment. Furthermore, the expansion is attributed to the automobile industry's growth in connected car services. The embedded segment has also significantly risen in the market.

By Application Analysis

Growing Focus of End-users on Safety and Light Vehicle Structure to Drive the Demand for Body Engineering

By application, the market is categorized into body engineering, chassis engineering, powertrain engineering, safety systems, infotainment systems, and others (wheel assembly and autonomous & connected cars).

In 2023, the body engineering segment held the largest revenue share of the market. This is due to the electrification of lightweight EVs that take aerodynamics into account when replacing traditional patterns. Furthermore, the segment is expected to continue its dominance throughout the forecast period owing to the increasing adoption of EV technologies. In addition, there has been an emphasis from automotive industry on further integrating lightweight body materials into vehicles to reduce the overall weight and improve the aerodynamic ratios of vehicles.

The use of autonomous driving/ADAS will significantly grow throughout the forecast period due to its ability to detect and recognize its surroundings while providing safe mobility. ADAS consists of multiple sensors such as LIDAR, GPS, radar, inertial measurement units, and others that provide advanced sensory information and control system integrators for road navigation.

OEM investments in powertrain technologies and overall weight reduction are expected to boost the growth of the powertrain and chassis engineering segment. The market for infotainment systems is expanding due to a trend toward luxury and comfort with advanced features such as steering wheel audio controls, hands-free voice control, and touch-sensitive preset buttons. The safety systems include an Anti-lock Braking System (ABS), Electronic Stability Control (ESC), Tyre Pressure Monitoring System (TPMS), and Lane Departure. Most transport authorities have made it mandatory for OEMs to have these safety features from base versions of their vehicles. This has been a major factor propelling the growth of this segment in the market.

By Location Analysis

Feasible and Convenient Availability of Service Making the In-house Segment Grow in the Market

Based on location, the market is divided into in-house and outsource.

As major Original Equipment Manufacturers (OEMs) prefer to keep complex automotive engineering services such as powertrain design and engine and transmission systems for in-house development, the in-house segment held the largest portion of the overall market in 2023 These designs and optimizations differ from one OEM to the next and call for various methods and specializations that can be carried out internally for superior outcomes. It can also keep the design standards' confidentiality. Data security for technological advancements and automotive designs also contributes to this market's dominance.

The outsource segment is expected to grow at the highest growth rate owing to increasing focus from leading companies to outsource its designs and commercial projects to reduce the overall costing. Furthermore, lower capital investment companies are likely to go for outsourcing as it offers short term delivery of solutions and products without the need for high capital.

REGIONAL INSIGHTS

Increasing Adoption of Autonomous Vehicles and Technologies to Propel the Market Growth in Asia Pacific

Geographically, the market is classified as North America, Asia Pacific, Europe, and the rest of the world. Asia Pacific is expected to dominate and fastest growing global automotive engineering services market share in 2023 and throughout the forecast period. Leading automotive OEMs outsource production and related operations to Asian countries, such as India and China, due to labor availability. As a result, automotive ESO service providers are focusing their efforts. Automotive ESO suppliers are moving their bases to the Asia Pacific region.

India offers a 15-26% cost advantage. India has provided global OEMs with a highly competitive market that caters to the needs of various global segments. Auto OEMs such as Kia, BYD, and MG have entered the Indian market due to stringent emission regulations worldwide. Programs such as FAME, Make in India, and NATRIP boost the region’s manufacturing facilities, infrastructure developments, and EV adoption. Also, the Central and State governments provide various incentives and subsidies to boost manufacturing.

The Asia Pacific market is predicted to register a positive CAGR, led by countries such as China, Japan, India, and South Korea.

Europe is estimated to be the second fastest-growing segment during the forecast period. This is due to the increasing expenditure on driver comfort and rising demand for autonomous vehicles. The growth in North America and RoW is attributed to the increasing new EV sales in particular regions such as the Middle East.

List of Key Companies in Automotive Engineering Services Market

Growing Adoption of Service Enhancement Measures to Propel Industry Expansion

Leading automotive engineering services companies are focused on enhancing their service offerings to strengthen their position in the market.

Harman contributes by designing and engineering of connected products and solutions for automakers, consumers, and enterprises headquartered in Stamford, U.S. It operates through four segments, connected car, lifestyle audio, professional solutions, and connected services. Harman is a subsidiary of Samsung Electronics (Korea). Harman’s division includes connected car systems, audio and visual products, enterprise automation solutions, & connected services. It operates in more than 30 countries across the Americas, Europe, Asia Pacific, the Middle East, and Australia.

LIST OF KEY COMPANIES PROFILED:

• Harman International (U.S.)


• FEV Group (Canada)


• L&T Technology Services Ltd. (India)


• Robert Bosch GmbH (Germany)


• Continental AG (Germany)


• Bertrandt AG (Germany)


• Capgemini Engineering (France)


• AVL (Austria)


• EDAG Engineering GmbH (Switzerland)


• IAV GmbH (Germany)

KEY INDUSTRY DEVELOPMENTS:

• July 2023: HCLTech announced its acquisition of a Germany-based automotive engineering company and service provider ASAP Group for EUR 251 million (USD 273.25 million). The company acquired 100% stake in the ASAP Group and aims to strengthen its market position in mobility areas such as autonomous driving, e-mobility, and connectivity.


• May 2023: L&T announced that its engineering and services department aims to boost investment in self driving electric vehicle technology in India. This is expected to attract global market players toward India.


• April 2023: Harman International, Inc., announced the opening of its new center in the Tamil Nadu. The move would help the company expand its automotive engineering solutions through this new center. The company aims to cater to the growing demand in the Indian and global automotive markets.


• December 2022: Tata Consultancy Services (TCS) India and Ansys have signed a Memorandum of Understanding (MOU). Under it, both companies will use U.S.-based engineering simulation software providers to bring new development in Electric Vehicle (EV) technology.


• January 2022: An American automotive supplier selected L&T Technology Services Limited (LTTS) as a strategic partner to provide engineering services for their EV and Power Electronics product portfolio. This deal cost about USD 45 million. LTTS is setting up a center of engineering excellence that the global technology teams in North America, Europe, and Asia will leverage.

REPORT COVERAGE

The automotive engineering services market research report provides a detailed analysis of the market and focuses on key aspects such as leading companies, product types, end-users, design, and technology of automotive type of engineering services. Besides this, the report offers insights into the market trends and highlights key industry developments. In addition, the report encompasses several factors that have contributed to the growth of the market in recent years.

Report Scope & Segmentation