Automotive Engineering Services Market (2020-2027) – Impact of COVID-19 On Automotive Engineering Services Market

According to a new market research report titled, “Automotive Engineering Services Market by Service Type (Concept, Prototyping, Testing), Application (Body Engineering, Powertrain, Infotainment, Chassis, Safety Systems, Electrical, Body Controls, Connected Cars), Vehicle Type – Global Forecast to 2027”, the automotive engineering services (AES) market is expected to grow at a CAGR of 6.7% from 2019 to 2027 to reach $18.6 billion by 2027.

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Automotive industry is one of the most highly competitive and progressive industries across the globe. In order to survive in this highly fragmented and competitive market, automotive industries need to be consistent in innovation to deliver optimum quality and durability while reducing their production cost. Also, the automotive manufactures need to ensure that their systems and components of the offerings must function properly throughout the product’s lifecycle, and an automotive engineering service is one of the most preferred ways to achieve such goals. Automotive engineering is the activity of designing and constructing automobiles with the combination of mechanical, electrical, electronic, software, and safety engineering. Automotive engineering services are provided for designing and testing different systems such as brake, energy & powertrain, safety systems, fuel technologies, and transmission, among others. Significant rise in the sales of electric vehicles, notable rise in R&D investments by automotive industry, and stringent government policies and regulations for ICE vehicles are the major contributors driving the growth of this market. In addition, the advent of autonomous vehicles and deteriorating environmental conditions are further offering new growth avenues for automotive engineering service providers. However, issues associated with intellectual property (IP) and shifting business model hinders the growth of the automotive engineering services market. Moreover, the negative impact of COVID-19 on the global automotive production as well as consumption significantly hinders the growth rate of this market.

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Impact of COVID-19 on Automotive Engineering Services Market

In 2020, the world is facing a very difficult and unpredicted situation, as the coronavirus continues to spread. The COVID-19 has started showing its distressing collision on most of the profitable businesses across the globe. The outbreak is also creating serious challenges to various industries and the global automotive industries and associated businesses are no exception to this trend. Small and medium scale automotive companies are feeling the hardest hit as all the major aspects of businesses including manufacturing, supply chain, and demand for automobiles suddenly slammed. However, big automotive players are also facing their shares of problem such as zero sales during the lockdowns, high operational and maintenance expenditures, and stockpiles of existing automobiles. Although most of the countries affected by COVID-19 have started to resume their manufacturing units including China and European countries, the overall automotive industry will certainly take a long time to get back on track. This will also affect its associated industries such as spare part manufacturing, oil industry, insurance industry, and engineering services market.

According to the data published by Autocar India Magazine, the global vehicle sales in March 2020 dipped to just above 5 million units and witnessed a significant drop of 39% compared to sales in March 2019. Top global automotive manufacturing countries including China, the U.S., Germany, the U.K. and India stood still in terms of manufacturing and sales during the first quarter of 2020. The U.S. and China registered double digit decline in automobile sales; however, Europe witnessed the worst decline in more than 38 years. Combined sales of Europe-27 registered a drop of 52% compared to previous year. The losses made automotive companies fall back years and will certainly take a long time to regain their growth trajectory. However, sales in electric cars, especially in some European countries show positive signs of growth. Electric vehicles including hybrids, plug-ins, and full-electrics recorded a positive growth of 15% and total market share of 17.4% in European countries. This is one of the few silver linings in overall dark time in the global automotive market.

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Automotive companies now individually and collectively started to take crucial steps to up the tempo of the overall market. Changing manufacturing & marketing strategies, alliances and collaboration, and aid from local government’s economic revival policies are few of the several trends being undertaken to re-track the automotive industry. Ford announced Dial-A-Ford service, through which customers can book a test ride or book a new car and get delivered at their door step. Many companies such as Porsche and Piaggio Group are providing extended warranties and complimentary service packages on new purchases. Governments are also extending their hands for the revival of automotive industry by offering tax benefits, economic packages, and relaxation in stringent regulations and policies. Besides, incentive programs for manufacturing electric vehicles which were there before occurrence of pandemic are expected to play major role in bringing the industry back on growth path. This also expected to help supportive industries including engineering services market. As a result, the overall automotive engineering services market along with automotive industry is expected to overcome this huge obstruction within next 4 to 5 years.

The global automotive engineering services market study presents historical market data in terms of value (2018 and 2019), estimated current data (2020), and forecasts for 2027. The market is segmented on the basis services, location, application, vehicle type, and geography. The study also evaluates industry competitors and analyses the market at a country level.

Based on service type, the prototyping services segment is estimated to command the largest share of the overall automotive engineering services market in 2020. The large share of this segment is mainly attributed to the constantly growing competition in automotive industry to attain higher performance standards such as fuel efficiency, aerodynamics, connectivity, and security. By employing prototyping techniques, manufacturers experience shorter production times and lower production costs; easier product innovation; and greater supply chain transformation along with safer, cleaner, and lighter part designs. However, the automotive designing engineering services segment is expected grow with the fastest growth rate over the forecast period. The rising demand for customized vehicles and increasing efficiency of software tools to design with utmost precision is augmenting the growth of the automotive designing engineering services market. Besides, the growing demand for environment friendly automobiles is also expected to help designing services to grow with rapid pace.

Based on location, the in-house segment is estimated to account for the largest share of the overall automotive engineering services market in 2020, as major original equipment manufacturers (OEMs) want to keep complicated automotive engineering services such as engine design, powertrain design, and transmission systems for in-house development. These designs and optimizations vary from one OEM to another and, thus, require different techniques and specialization that can be done in-house for better results. Besides, data security for technological upgrades and automotive designs also supports the dominance of this segment. However, the outsourcing segment is anticipated to grow with the fastest CAGR during the forecast period. The constant pressure to quickly design, prototype, manufacture, and launch new products in the marketplace, in response to ever-decreasing product lifecycle and greater demand, is placing a strain on the in-house engineering workforces and processes of companies, and hence, the companies are now gradually shifting towards outsourcing of engineering services.

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Based on application, the interior, exterior & body engineering segment is estimated to account for the largest share of the overall market in 2020. Rise in customer expenditure on automobiles and growing technological integrations with the vehicles is encouraging various engineering services such as interior, exterior designing, and body engineering. In addition, the growing demand from customers for customized design of interior and exterior of vehicle is anticipated to help interior, exterior & body engineering application segment to maintain its dominance over the coming years. However, the autonomous and connected cars segment is projected to grow with the fastest growth rate during the forecast period. With the advent of autonomous and connected vehicles, companies and OEMs are pooling their R&D resources for designing and developing successful prototypes of autonomous vehicles, which is anticipated to boost the growth of this segment.

Based on vehicle type, the passenger car segment is estimated to account for the largest share of the overall automotive engineering services market in 2020. The large share of this segment is due to the high adoption of sensors and utilization of vehicle data for autonomous driving and predictive maintenance. In addition, the increasing customer demand for safer and comfortable passenger vehicles has compelled OEMs to invest more in vehicle safety, advanced connectivity features, and smart infotainment systems which is driving the growth of this segment. Furthermore, passenger cars also hold the largest share in the overall automobile production, which is anticipated to create growth opportunities in this segment. For instance, according to automobile production statistics-2019 by International Organization of Motor Vehicle Manufacturers (OICA), 91,786,861 vehicles were manufactured globally out of which 67,149,196 are passenger cars. However, the commercial vehicle segment is anticipated to grow with the fastest growth rate during the forecast period. Advent of autonomous vehicles along with the need for productivity, energy efficiency, safety, reliability, and reduced carbon footprints provide high growth opportunities for the commercial vehicles segment.

Geographically, the Asia-Pacific is estimated to command the largest share of the global automotive engineering services market in 2020, followed by Europe, North America, Latin America, and the Middle East & Africa. The factors such as rising vehicle production, increasing demand for luxury vehicles, growing sales of electric cars, and technological development are driving the automotive engineering services market in the Asia Pacific region. The Asia-Pacific region comprises of rapidly emerging economies such as China and India, along with developed nations such as Japan and South Korea. These countries are considered as the largest market for automotive manufacturing, and in recent years, the region has also emerged as a hub for automobile production. High automotive demand and production along with the growing concerns about rising CO2 emission and traffic congestions is driving the growth of the automotive engineering services market in the region. However, North America is expected to witness rapid growth during the forecast period. North America is one of the largest automotive manufacturing hubs in the world, and vehicle production is a crucial element of the North American economy. There has been a surge in the demand for electric vehicles as government is giving subsidies and also pushing the availability of energy efficient vehicles. Furthermore, advent of autonomous vehicles is creating opportunities for the growth in this market. For instance, in 2013, the National Highway Traffic Safety Administration (NHTSA), a traffic regulations body in the U.S., allowed self-driving car testing in several states, including Nevada, California, Florida, Michigan, and Washington D.C.

The U.S is the prominent market for automotive engineering services in North America, mainly driven by the growing R&D investment by automotive industry. According to the Auto Alliance, a defunct trade group of automobile manufacturers, automakers typically invest $19 billion per year on R&D in the U.S. alone — an average of $1,700 for each new vehicle produced. Furthermore, according to the Edison Electric Institute (EEI), the number of EVs on the U.S. roads is projected to reach 18.7 million in 2030, which is anticipated to boost the adoption of automotive engineering services in the country.

The global automotive engineering services market is consolidated and dominated by few major players, namely Altran Technologies (France), Akka Technologies (France), Bertrandt AG (Germany), EDAG Engineering GmbH (Germany), IAV GmbH (Germany), HCL Technologies Limited (India), Alten Cresttek (U.S.), L&T Technology Services Limited (India), and FEV Group GmbH (Germany), among others.

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Scope of the Report:
Automotive Engineering Services Market by Service Type

Concept/Research
Designing
Prototyping
System Integration
Testing
Automotive Engineering Services Market by Location

In-house
Outsourced
Automotive Engineering Services Market by Application

Interior, Exterior, and Body Engineering
Body Electronics
BIW
Others
Powertrain and Exhaust
Engine Systems
Electric Systems
Others
Infotainment & Connectivity
Connectivity
HMI
Others
Chassis
Braking System
Steering System
Others
Safety Systems
ADAS
Passive Safety
Others
Electrical, Electronics and Body Controls
Simulation
Autonomous & Connected Cars
Radar
Adaptive Control
Others
Automotive Engineering Services Market by Vehicle Type

Passenger Car
Commercial Vehicle
Automotive Engineering Services Market by Geography

North America
U.S.
Canada
Europe
UK
Germany
France
Italy
Rest of Europe
Asia-Pacific
China
India
Japan
Rest of Asia-Pacific
Latin America
Middle East and Africa

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