Automotive Engineering Services Market Size, Share & COVID-19 Impact 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, 2022-2029

The global automotive engineering services market size was valued at USD 19.19 billion in 2021. The market is projected to grow from USD 19.55 billion in 2022 to USD 28.85 billion by 2029, exhibiting a CAGR of 5.7% during the forecast period. The Asia-Pacific dominated the automotive engineering services market with a share of 46.11% in 2021.

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.

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. Further, 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.

COVID-19 IMPACT 

Production Delays and Decreased Vehicle Demand Owing to the Effect of COVID-19 Pandemic

The COVID-19 pandemic has negatively affected many economies around the world. Countermeasures such as shutdowns and quarantines to fight COVID-19 have significantly affected many industries around the world, including the automotive industry. Most car manufacturers continued to produce vehicles with limited power and safety measures. Sales of electric cars, especially in some European countries, are showing positive signs of growth. Electric vehicles, including HEV, PHEV, and BEV witnessed positive growth of 15% in European countries and a total market share of 17.

Car companies and local governments are trying to revive the dismal car industry during the crisis by introducing several rescue strategies and packages.

• For example, India's finance ministry announced layoff packages for the auto industry, and local industries accepted it. Similarly, the Japanese government has proposed a package of about USD 2 billion to moderate the economic impact of COVID-19 and help industries, including the auto industry. The Japanese government has also announced special incentives and discounts for companies that want to move their production units out of China.

LATEST 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.      

DRIVING 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.

• For instance, in September 2021, the International Organization for Standardization (ISO) and the Society of Automotive Engineering (SAE) signed a partnership to work on the definition of dedicated cybersecurity standards required for the automotive industry.

SEGMENTATION

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 2029. 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.

• For instance, in November 2019, FEV Group GmbH launched sustainable mobility solutions and technologies at the 9th Chinese automotive and motor technology fair, Aachen Colloquium.

Software is the fastest-growing segment with the highest CAGR in the market. Its growth 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 2021, 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.

• For example, in November 2019, FEV Group GmbH launched solutions and technologies utilizing advanced materials, such as polymer composites, magnesium (Mg), and some other alloys, for cost-efficient design kit for lightweight vehicle construction and design development for A00 vehicles to reduce the vehicle’s body and chassis weight by 50% and support minimizing the vehicle’s fuel consumption.

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 2021. 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.

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 2021 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.

KEY INDUSTRY PLAYERS

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:

• 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.


• 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.


• February 2021: AVL of Austria signed a strategic partnership with Batemon to develop virtual batteries. The collaboration between AVL and Batemon aims to strengthen battery modeling expertise, enabling customers to oversee planning, operation and system development, battery testing and fleet operation.


• September 2020: Bertrandt and Bozzio AG signed a cooperation agreement. Bozzio AG is one of the leading manufacturers of drive-by-wire systems based in Switzerland. This cooperation will further develop autonomous vehicle systems. It will provide complete support for their customers from the initial planning to the final application, influencing vehicle development in the future.


• April 2020: Capgemini announced the acquisition of Paris-based engineering consultancy Altran Technologies for USD 4.1 billion. This acquisition provides Capgemini with a complete set of capabilities, including R&D strategy, manufacturing services, digital engineering, software, and integration and product design.

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