Global Automotive Engineering Services Outsourcing (ESO) Market Overview
Automotive manufacturer outsources their engineering operations to focus on core activities and to leverage external technological expertise. The use of external assembly service providers means outsourcing providers is widespread in the automotive industry and is embraced in the build-to-order concept. With a rise in challenges of meeting environmental & emission norms while dealing with rising capital costs, stringent economic factors, increased competition due to globalization and liberalization, and customer relationship management, outsourcing appears to be trending upward. Many activities that once were performed in-house are now outsourced to external suppliers. Demand for automotive engineering services outsourcing is set to rise owing to intense competitive pressures: rising labour costs, shorter product cycles, dropping profitability, and rapid growth in emerging markets, and heightened focus on emission standards, safety, and comfort.
According to Value Market Research, the global Automotive Engineering Services Outsourcing (ESO) market size was valued at about USD XX billion in 2020 and is estimated to grow at a CAGR of around 28% during the forecast period 2021 to 2027.
Substantial growth is attributed to growing localized production and noteworthy venture by a significant OEM in Brazil and Argentina, and Middle East countries. Automakers are using outsourcing services to cut fixed costs and to shift component and subassembly production to suppliers. This simplifies final assembly by cutting down on the number of operations involved. Favorable government support for automotive growth and a wave of OEM investment in new manufacturing facilities, simultaneously creating and capitalizing on growing demand. Although OEMs usually do not outsource designing solutions that are key to vehicle performance, such as mechanical design services, electronics, and vehicle engine design. Rising concerns around the disclosure of intricate automobile and intellectual property rights designs add to a significant hindrance.
The global automotive engineering services outsourcing (ESO) market is highly fragmented. The market consists of well-established vendors with strong brand value and expertise in large-scale handling projects. The market is dominated by players such as Bertrandt, Altran, EDAG, Tata Technologies, TCS, Alten, Akka Technologies, Assystem, KPIT, and L&T TS.
In this research report, the automotive engineering services outsourcing (ESO) market is segmented by location, application, vehicle type, propulsion, and region.
Analysis, By Application
By application, the market is segmented into designing, prototyping, system integration, testing, and others. The prototyping segment dominated the market. The development of numerous prototypes before finalizing designs and processing mass production incurs exorbitant costs. Thus, OEMs outsource prototyping. By outsourcing prototyping, manufacturers experience many advantages such as shorter production times and lower production costs, more accessible product innovation, and more significant supply chain transformation. The designing segment is estimated to register the highest CAGR during the forecasted timeframe. The rising demand for lightweight body materials and automobiles with electric and refined aerodynamics is projected to propel the designing segment's growth. Manufacturers are emphasizing creating automobiles with elongated and spacious interiors to balance the power-to-weight ratios. The automotive manufacturers are robustly investing in designing R & D and collaborating with the engineering services outsourcing companies to assemble intricate automobile features for their end customers. Outsourcing design gives access to a massive pool of talented designers with different artistic accomplishments.
Analysis, By Location
By location, the market is categorized into onshore and offshore. The onshore segment held the majority share in the global automotive engineering services outsourcing (ESO) market. Both offshore and onshore outsourcing have their own set of merits and demerits, onshore outsourcing accomplishes many of the drawbacks of offshoring tasks such as ease of communication, a greater level of control, responsiveness, and reliability, locally appropriate skill sets, costs less, political and financial stability. The offshore segment is anticipated to grow at a substantial rate during the forecast period. Offshore outsourcing is recognized as a viable way to remain competitive in an increasingly aggressive global environment. Offshore outsourcing offers many benefits, including cheaper labor costs and improved output, availability of highly educated offshore business specialists.
Analysis, By Vehicle Type
By vehicle type, the market is segmented into passenger vehicles and commercial vehicles. Among which passenger vehicles dominated the global market. Production of passenger vehicles is spurring due to the growing purchasing power of the middle class, launch of new car models, emerging trend of lightweight vehicle, vehicle electrification, and vehicle expiration and emission norms. Production of commercial vehicles is also projected to swell with the growing logistic and leasing market. All these will eventually contribute to the ever-increasing demand for automotive engineering services outsourcing (ESO).
Analysis, By Propulsion
By Propulsion, the market is fragmented into IC engine, electric vehicles, and hybrid vehicles. In 2020, IC engines dominated the global market, followed by electric and hybrid. An electric segment is projected to emerge as a potential segment to influence sustainability, government initiatives to reduce dependence on fossil fuels, and escalating carbon emission. Revised emission regulation, abundant availability of fossil fuels in some countries, and poor electricity infrastructure is steering the commercial vehicle segment.
Analysis, By Region
The global automotive engineering services outsourcing (ESO) market is analyzed across North America, Asia Pacific, Europe, Latin America, and Middle East & Africa. The Asia Pacific stands out as the largest in the global market and is the fastest-growing automotive engineering services outsourcing market. The rapid growth can be attributed to demand from developing countries such as China and India due to changing emission norms and vehicle electrification. Europe also offers a huge opportunity for market success with a large and growing population representing a vast consumer base and the capability of a diverse automotive maker. Heightened focus on emission standards, safety, and comfort are steering demand across the region. Countries, including Germany, UK, and France, are witnessing a surge in R&D spending.
Market Segmentation covered in the Report:
By Vehicle Type
- System Integration
By Propulsion Type
- Passenger Vehicles
- Commercial Vehicles
- IC Engine
- Electric Vehicles
- Hybrid Vehicles
- North America
- Asia Pacific
- Latin America
- Middle East and Africa
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