This phenomenon has largely benefited the automotive services outsourcing sector as it has helped to build a more global supply base for recently built assembly plants , resulting in the regional growth of the ESO firms. In addition, modular outsourcing has also gained popularity as automakers demand uniform interfaces built into their cars of self-contained operating modules.

In addition to the sourcing of facilities for simplified car components, the introduction of modular structures has made it easier for automotive OEMs to outsource complex self-contained modules. However, owing to the complexities of engine architecture, powertrain architecture, and transmission systems, some OEMs prioritise the in-house manufacture of their end goods at their key centres or captive destinations instead of procuring services from ESPs.

In reality, the worries over the exposure of sophisticated vehicle designs and intellectual property rights have prompted OEMs to set up their own production units in off-shore locations. It is expected that the transition of business models in which the suppliers are now producing the commodity in-house would be a roadblock to the otherwise growing industry.

Outsourcing helps enterprises gain product production convergence with corresponding tasks, such as engineering and warranty administration. For example, enterprises that incorporate their warranty mechanism with the engineering design function will obtain timely input from their clients without disrupting revenue on design failures, problem solving, and development, which in turn decreases warranty costs.

Application Segment

Based on the application, the market is segmented into autonomous driving/ADAS, body & chassis, powertrain and after-treatment, infotainment & connectivity, and others. The powertrain and after-treatment application lead the market growth in 2019 and it is anticipated to hold its CAGR during the forecast years. In consideration of the fuel economy and the elimination of carbon emissions, the fundamental developments taking place in the automotive industry, especially in internal combustion (IC) engines, include automotive OEMs opting for improved green powertrain technology, including electrification of powertrains. The significant investments made by OEMs in powertrain technology are expected in the coming years to lead to the growth of the market.

Location Segment

In terms of the location segment, the market is segmented into on-shore and off-shore. In 2019, the on-shore segment accumulated the major share and is expected to continue the trend over the forecast years. Although on-shore outsourcing applies to the supply of facilities under the legal limits of OEMs, off-shore outsourcing specifies the outsourcing assistance to customers located in overseas locations. The highest revenue share in 2019 was held by the on-shore group. As the automotive ESO suppliers are dependent on the OEMs in the growing economies, especially for design, prototyping, and other types of specialised services, it is anticipated to maintain its leading role in the global market.

The Asia Pacific region dominated the overall market share with a CAGR of more than 28% in 2019 and it is projected to keep its position during the forecast years 2018-2028. Big automotive OEMs are outsourcing production and associated operations to these destinations due to the availability of labor incentive and cost-effective facilities in countries such as the Philippines, China and India. Consequently, ESO automotive suppliers are relocating their bases in the Asia Pacific region. Japan has emerged as one of the major producers of vehicles with growth potential for APAC's ESPs. Japan's government plans to boost sales of next-generation cars by 50-70% by 2030.

South America region is forecasted to have a rising demand due to rising energy consumption in growing economies like Brazil and Argentina. This development is due to OEMs partnering with the government of South America to build electric and hybrid vehicles originating in Brazil, Colombia and Argentina. In addition, it is projected that growing government expenditure allocations to develop transport networks throughout the region would lead to demand growth over the forecast period.

The major players of the global automotive engineering services outsourcing market are Alten GmbH; Altran Technologies S.A.; HORIBA, Ltd.; Bertrandt; and AVL List GmbH. Moreover, the market comprises several other prominent players in the automotive engineering services outsourcing market as EDAG ENGINEERING GMBH, IAV GMBH, FEV Group, MBTECH GROUP GMBH, and KISTLER INSTRUMENTE AG. The automotive engineering services outsourcing market consists of top, medium level and a number of domestic players in the global market. In addition to this, the well-established players in the industry have made various strategies and research & developments to compete with other players in the regional and global market.