The automotive engineering services market is projected to grow from an estimated USD 153.2 billion in 2022 to USD 243.9 billion by 2028, registering a CAGR of 8.1%. Factors such as growing shift to EVs and need for advanced technology for easing concerns on vehicle safety, efficient component design will drive the market for automotive engineering services in the coming years. The rapid shift to EVs will increase demand for services related to EV batteries, drivetrain and other systems including research, design, prototyping, integration and testing services. Spending on ICE vehicles on the other hand will reduce in the coming years with top OEMs and AES providers announcing plans to adjust R&D investment for electrification and advanced technologies such as ADAS, Connectivity among others.
Increasing urbanization and evolving customer needs have influenced global passenger car sales in recent years. The automotive engineering services market has grown significantly in the passenger cars segment due to the increasing customer demand for connectivity and safety features. The growing demand for digital connectivity features is supported by a wide network coverage of 5G connectivity and the installation of IoT devices in premium sedans and SUVs. In the present scenario, customers want eco-friendly mobility combined with communication. This creates an opportunity for OEMs to offer more connectivity features in their upcoming vehicles. Hence, the demand for various automotive engineering services is set to increase during the forecast period. Companies such as IAV Automotive Engineering, Automotive Engineering Services (AES), HARMAN International, and Ricardo provide engineering services for passenger cars. For instance, IAV Automotive Engineering carried out a project in June 2021, for the development of a model for the optimum placement of sensors and devices in autonomous passenger vehicles. Similarly, in November 2021, Ricardo announced its plan to develop fully autonomous ride-hailing and ride-sharing vehicles for global mobility-as-a-service. In August 2022, L&T Technology Services Limited (L&T) signed a 5-year deal with the German OEM, BMW Group. Under this deal, L&T will provide automotive engineering services such as software build and integration and infotainment validation and defect management to the OEM.
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AES providers offer turnkey solutions to OEMs and component manufacturers that require the outsourcing of their complete ER&D process. These solutions are more generic and can apply to multiple clients with some customizations. Companies like Capgemini, HARMAN, FEV, AVL, Ricardo, and HCL Technologies provide turnkey solutions to OEMs and component manufacturers. In April 2022, for instance, FEV launched its FEV.io Intelligent Mobility Software, which combines its expertise in intelligent mobility, software development, and innovative power solutions. As part of this offering, ADAS and connectivity services will be available for the automotive industry in an all-inclusive software suite. Similarly, in October 2021, IAV Automotive Engineering showcased its modular platform for BEVs. The e-drive platform developed by IAV enables the transformation of a wide variety of vehicle types and their drive topologies through the combination of scalable and modular systems, for electrification. Further, in September 2022, HARMAN launched its new Ready Care service, which detects driver behavior and provides solutions for safer driving. The company also offers solutions like Cognitive Distraction, Stress-Free Routing, and Personalized Comfort along with HARMAN’s connected vehicle solutions to improve driver safety.
The automotive engineering services industry in North America is expected to grow at a rapid pace in the coming years. The region is known for innovations, cutting-edge R&D, and technological advancements in electric vehicles. North American OEMs such as Ford Motor Co., Tesla Inc, and General Motors Co, along with established European and Asian OEMs such as Toyota (Japan), Nissan (Japan), Honda (Japan), Hyundai/Kia (South Korea), BMW (Germany), and Volkswagen (Germany) offer ADAS features in vehicles. Home to the big three—Ford Motor Company, General Motors, and Fiat-Chrysler Automotive—the market in the US favors cars with advanced comfort and safety technologies. Component providers such as Italian tire manufacturer Pirelli will invest USD 15 million over two years in Mexico for a new R&D center. OEMs and automotive engineering service providers in the region have opened new R&D facilities. For instance, in October 2022, Ford announced the opening of its global technology and business center in Mexico. Similarly, in January 2022, HCL Technologies announced the opening of a new R&D tech center in Canada to provide automotive services like rapid product prototyping, collaborative research, and continuous learning to create products faster for the market. Further, in November 2022, L&T Technology Services announced the setting up of an R&D Center in Toronto, Canada for engineering services and would cover functions such as rail track defect detection, mobility solutions, digital asset management, and sensors and communications systems. The upcoming EV shift will lead companies in the region to increase their outsourcing budgets for developing this technology. Companies like GM and Ford, among others, in this region have already announced plans to increase their R&D budgets for developing this technology. The Federal Communications Commission’s 5G FAST plan will also impact the market; the key motive is to provide high-speed communications that will support Vehicle-to-Vehicle (V2V) and Vehicle-to-Everything (V2X) environment data transfer. Such plans are bound to increase demand for connected vehicle services, which, in turn, will drive the automotive engineering services market.
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Key Market Players
The automotive engineering services market is dominated by established players such as Capgemini (France), IAV Automotive Engineering (Germany), Tech Mahindra (India), AKKA Technologies (Belgium), and HCL Technologies (India), among others.
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