Automotive Engineering Services Outsourcing (ESO) Market Report

Automotive Engineering Services Outsourcing (ESO) Market Analysis Report By Application (Designing, Prototyping), By Location (On-shore, Off-shore), By Region, And Segment Forecasts, 2018 - 2025

  • Published Date: Nov, 2018
  • Base Year for Estimate: 2017
  • Report ID: GVR-2-68038-635-6
  • Format: Electronic (PDF)
  • Historical Data: 2014 - 2016
  • Number of Pages: 145

Industry Insights

The global automotive engineering services outsourcing (ESO) market size was valued at USD 39.81 billion in 2017 and is projected to expand at a CAGR of 28.4% from 2018 to 2025. Companies in various sectors, such as automotive, aerospace, pharmaceutical, construction, and telecom, approach Engineering Service Providers (ESPs) for cost-effective and high-quality engineering solutions.

Over the last decade, the demand for specialized IT and core automobile engineering services has witnessed an upsurge. Thus, apart from conventional engineering capabilities like drafting, modeling, and testing of automobile parts, vendors are now focusing on other offerings including designing and styling of vehicles, simulation, prototyping, testing, and powertrain engineering.

U.S. automotive ESO market

Most of the OEMs are collaborating with automotive ESO providers for designing, developing, and testing new engines. This, in turn, is expected to drive the global market. For instance, in February 2017, Jaguar Land Rover Limited collaborated with ALTEN Group for designing and developing new engines. This subsequently helped enhance the performance of the former’s vehicles.

Automotive ESPs are enhancing their technical skills as per the changing business environment and are developing more adaptive and customized solutions for OEMs. For instance, in March 2016, AVL List GmbH developed AVL X-ion, a high-speed data acquisition platform designed for powertrain development, which can adapt to different units under various test environments.

Application Insights

On the basis of application, the market has been segmented into designing, prototyping, system integration, and testing. Prototyping was the dominant segment in 2017 and is expected to account for a revenue share of approximately 33.0% by 2025. Developing prototypes can be expensive as the process is lengthy and involves the cost of developing hardware components.

As a result, OEMs usually prefer funding ESPs or working in collaboration with them for product development. Incubation centers formed by OEMs in developing countries offer prototyping-related technical services and solutions. Additionally, they provide technical training, as well as funding, to the engineering service providers they partner with. The designing segment is expected to witness a CAGR of 29.1% over the forecast period.

Although, OEMs usually do not outsource designing services that are key to vehicle performance, such as the electronics and vehicle engine design; mechanical design services are off-shored to developing countries. On the other hand, countries like China and India have greatly benefitted through outsourcing their design services that have a high demand from vehicle manufacturers in developed countries.

Location Insights

On the basis of location, the automotive engineering services outsourcing market has been categorized into off-shore and on-shore locations. The off-shore segment accounted for a larger revenue share in 2017 and is anticipated to continue its dominance over the forecast period. The on-shore segment, on the other hand, is expected to witness highest CAGR.

The demand for off-shore outsourcing has witnessed a surge owing to the growing confidence of automotive OEMs in the service providers based in developing countries. As a result, operations that require a higher level of technical skills are increasingly being outsourced to off-shore locations. OEMs continually compete with each other to launch new product variants and models within the shortest span of time.

Global automotive ESO market

Thus, intense competition in the automobile industry, especially among companies based in U.S., Japan, and Germany, has driven the growth of the off-shoring segment. Stagnant growth in home markets and development opportunities in developing countries are other factors encouraging OEMs to enhance their presence in off-shore locations. Additionally, given the cost advantage that off-shore providers offer, their services are leveraged by OEMs to operate in other regional markets as well.

Regional Insights

Automotive engineering services are outsourced to countries that have a wide presence of software design companies, robust auto component industry, and a substantial labor force with skilled workers in technical domains. For instance, OEMs outsource their engineering business to India since they get the advantage of obtaining cost-effective expert services.

Thus, presence of major software design companies has positively impacted the growth of the automotive engineering services outsourcing market in India. In 2005, the Indian government formed a strategic alliance with the Indian Automotive Industry and started the National Automotive Testing and R & D Infrastructure Project (NATRiP). This resulted in the creation of a state-of-the-art validation, testing, and R & D infrastructure, which is involved in continuous vehicle R & D in the country.

Japan is among the top three car-producing countries in the world with the presence of global auto brands, such as Toyota Motor Corporation and Honda Motor Co., Ltd. This has also led to the emergence of automobile ESO providers in Japan. According to Subject Matter Experts (SMEs), automotive parts manufactured in Japan are exported worldwide and account for around 15% of the total manufacturing shipments of the country.

Europe region is also projected to witness a significant growth over the forecast period owing to technological advancements brought about by automotive service providers through new product offerings. For instance, in March 2018, HORIBA, Ltd. launched an extended version of MEDAS (Mobile Efficient Dynamic Altitude Simulator). It is an innovative altitude simulation system for performance and emission optimization in engine development intended for flexible use.

MEDAS offers the ability to control humidity from 10-80% over an altitude simulation range. Germany is home to global auto giants including AUDI AG, BMW AG, Mercedes-AMG GmbH, and Volkswagen AG. Major providers in the country are partnering with OEMs and forming strategic alliances with each other to build development centers in other countries. They are also using advanced technologies to increase their customer base and expand their geographical footprint.

Automotive Engineering Services Outsourcing Market Share Insights

Some of the companies in the global automotive ESO market are AVL, Altran Technologies Limited, Alten SA, P3 Automotive GmbH, ESG Elektroniksystem- und Logistik-GmbH, ITK Engineering GmbH, and M Plan GmbH. Most of these major market players are adhering to new product development and M & A to gain competitive edge over others. For instance, in March 2017, FEV Group acquired the vehicle development service provider, STEA.

The acquisition enabled the FEV Group to expand its expertise in complete vehicle development. Moreover, these companies are also forming strategic alliances with other automobile equipment manufacturers to enhance their capability and product portfolio. For instance, in 2016, AVL List GmbH collaborated with Greenlight Innovation, a supplier of testing equipment to collectively produce a fuel cell system testing product line.

Report Scope



Base year for estimation


Actual estimates/Historical data

2014 - 2016

Forecast period

2018 - 2025

Market representation

Market revenue in USD Billion & CAGR from 2018 to 2025

Regional scope

North America, Europe, Asia Pacific, South America, and MEA

Country scope

U.S., Canada, Mexico, Germany, France, U.K., China, India, Japan, and Brazil

Report coverage

Revenue forecast, company share, competitive landscape, growth factors, and trends

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Segments Covered in the Report

This report forecasts revenue and volume growth at global, regional, and country levels and provides an analysis of latest industry trends in each of the sub-segments from 2014 to 2025. For the purpose of this study, Grand View Research has segmented the global automotive engineering services outsourcing (ESO) market report on the basis of application, location, and region:

  • Application Outlook (Revenue, USD Billion, 2014 - 2025)

    • Designing

    • Prototyping

    • System Integration

    • Testing

  • Location Outlook (Revenue, USD Billion, 2014 - 2025)

    • On-shore

    • Off-shore

  • Regional Outlook (Revenue, USD Billion, 2014 - 2025)

    • North America

      • U.S.

      • Canada

      • Mexico

    • Europe

      • Germany

      • France

      • U.K.

    • Asia Pacific

      • China

      • India

      • Japan

    • South America

      • Brazil

    • Middle East & Africa (MEA)

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