Automotive Engineering Services Outsourcing Market - Size, Share, Industry Trends, and Forecasts (2025-2032)

By Service Type:

Based on service type, the automotive engineering services outsourcing market is segmented into design and prototyping services, manufacturing support services, system integration services, testing and validation services, and others.

Trends in the service type:

• Engineering companies provide knowledge in several areas, including mechanical design, electronics and controls, materials science, and thermal management. Grasping the distinct needs and challenges of each service area allows outsourcing providers to customize their services to address the particular requirements of automotive producers and suppliers, boosting market expansion and competitiveness.
• The swift rise of electric vehicles (EVs) and self-driving technologies necessitates specialized engineering knowledge, increasing the demand for ESO providers that possess these skills.
• These growth factors, and analysis in electric vehicles and autonomous driving would further create the automotive engineering services outsourcing market demand during the forecast period.

The designing and prototyping segment accounted for the largest revenue share of 36.51% in the year 2024 and it is expected to register the highest CAGR during the forecast period.

• The growth of this segment is linked to the heightened use of cutting-edge technologies, like 3D printing technology, by the automotive sector to create prototypes of assemblies, specific components, or an entire vehicle model.
• With the help of 3D printing technology, producers can quickly detect flaws in the prototype and implement necessary corrections promptly, promoting a cost-effective strategy.
• Additionally, prototyping allows for quicker iterations and verification of designs, resulting in shorter product development timelines, which is vital in the fiercely competitive automotive market, where time-to-market serves as a key differentiator.
• The increasing need for sophisticated design tools such as advanced Virtual Reality (VR) technologies, simulation software, Computer-Aided Design (CAD) that enable complex and efficient vehicle design workflows is presenting substantial prospects for ESO providers.
• The altered focus of car manufacturers to enhance user experience through innovative vehicle designs featuring ergonomic interiors, state-of-the-art infotainment systems, and user-friendly interfaces is fuelling the demand for ESO providers that specialize in the design process.
• For instance, Bertrandt offers broad range of designing and prototyping services, that are created with virtual reality, mixed reality, and simulation. Further, Bertrandt collaborates with all leading OEMs and operates in the sector of commercial and specialized vehicle manufacturing. For instance, they developed ergonomic designs for the workspaces of drivers and operators.
• These advancements in designing and prototyping segment would further drive the automotive engineering services outsourcing market size and growth during the forecast period.

By Engineering Domain:

Based on the engineering domain, the market is segmented into electrical/electronic engineering, embedded systems, mechanical engineering, safety and compliance engineering, software engineering, and others.

Trends in engineering domain:

• The increasing technological expertise of Engineering Service Providers (ESPs) in providing research and development (R&D) and product innovation for vehicle positioning, connected cars, and guidance systems is anticipated to drive the global market during the forecast period.
• The IT enabled the integration of various advanced features such as Wireless Local Area Network (WLAN) connectivity, app integration, Bluetooth, navigation systems, and additional vehicle data from sensors. At the onset of engaging services from the Engineering Service Providers (ESPs), the automotive sector concentrated on mass production by merging standardization, synchronization, precision, continuity, and interchangeability.
• With the shift in customer demands, companies now focus on delivering mass customization of automotive production engineering services.

The embedded system segment accounted for the largest revenue in the year 2024 and it is expected to register the highest CAGR during the forecast period.

• Vehicles are becoming more and more dependent on software, with embedded systems being crucial. This shift is increasing the need for ESO providers skilled in software development, integration, and testing.
• Electric vehicles (EVs) necessitate advanced embedded systems for managing batteries, controlling motors, and facilitating charging. This is leading to fresh opportunities for ESO providers with knowledge in these fields.
• Connected vehicle technologies and the Internet of Things (IoT) are revolutionizing the driving experience. Embedded systems play a key role in linking cars to networks and enabling functions such as over-the-air updates and remote diagnostics.
• Therefore, growing electrification and increasing enhancements in safety and security features would further drive the automotive engineering services outsourcing market growth.

By Location:

Based on the location, the market is segmented into on-shore and off-shore.

Trends in the location:

• Organizations are progressively embracing a multi-shore approach, broadening their ESO alliances across various sites to reduce risks.
• Intricate projects that demand tight cooperation might prefer on-shore or near-shore (adjacent country) alternatives.
• These developments and analysis would further supplement the automotive engineering services outsourcing market trends during the forecast period.

The on-shore segment accounted for the largest revenue share in the year 2024.

• On-shore sites frequently have access to a proficient labor pool with specific engineering skills in automotive design, assessment, validation, and compliance with regulations.
• Additionally, they provide enhanced legal safeguards for intellectual property rights when compared to offshore sites. The obstacles, such as varying time zones, language differences, imposed legislation, and others, when working with ESPs from abroad, hinder OEMs from outsourcing to other nations, resulting in a notable rise in need for the onshore sector.
• Furthermore, the growing implementation of automation technology and self-service options has motivated automotive OEMs to obtain support from onshore engineering service companies.
• These factors and developments in the on-shore segment are shaping the future of automotive engineering services outsourcing market growth.

The off-shore segment is anticipated to register the fastest CAGR during the forecast period.

• The offshore movement in the automotive engineering services outsourcing market is growing as vehicle manufacturers more frequently look to delegate intricate engineering tasks to areas with reduced labor expenses. By employing qualified engineers from overseas, automotive businesses enjoy lower costs while upholding standards in sectors such as research and development, computer-aided design, and software integration.
• Developing regions such as India and Southeast Asia are at the forefront of this movement because of their expanding workforce and technological skills. This transition to offshore outsourcing supports firms in addressing the requirements of a swiftly changing automotive environment, where innovation and cost-effectiveness are crucial.
• These factors and analysis in the automotive engineering services would further drive the global market during the forecast period.

By Vehicle Type:

Based on vehicle type, the market is segmented into two/three wheelers, passenger cars, light commercial vehicles, heavy duty trucks, buses and coaches, and off-road vehicles.

Trends in vehicle type:

• The advancement of autonomous passenger vehicles necessitates significant software engineering, sensor integration, and artificial intelligence knowledge, resulting in heightened ESO in these fields.
• Consumers are pursuing more tailored features and choices in their vehicles, fuelling the need for ESO in design, aesthetics, and user interface creation.
• The rigorous emissions standards are propelling the need for ESO in powertrain enhancement and alternative fuel solutions.
• Connected commercial vehicles facilitate real-time monitoring, diagnostics, and data interpretation, escalating ESO in telematics and fleet management systems.
• Analysis and factors, such as growing need for connected vehicles and increasing stringent regulations would further drive the automotive engineering services outsourcing market share during the forecast period.

The passenger cars segment accounted for the largest revenue in the year 2024 and it is expected to register the highest CAGR during the forecast period.

• The movement towards electric vehicles is the primary catalyst for ESO in the passenger vehicle category. Car manufacturers are seeking external expertise in battery technology, motor design, and charging networks to speed up their EV progress.
• Passenger vehicles are progressively depending on software, necessitating ESO in software creation, evaluation, and integration.
• Consumers anticipate smooth connectivity and tailored features, propelling ESO in telematics, infotainment, and user interface design.
• For instance, in February 2024, EDAG Engineering GmbH enhanced its worldwide footprint by launching two new centers in Austria, located in Steyr and Neustift. The Steyr and Neustift sites have been operational since December 2023, offering a broad array of services in automotive development and robotics.
• ESO is essential in the advancement of passenger vehicles. By utilizing the skills and affordability of ESO providers, car manufacturers can enhance innovation, boost efficiency, and remain competitive in a swiftly evolving market. This in turn driving the automotive engineering services outsourcing market during the forecast period.

By Propulsion:

Based on propulsion, the automotive engineering services outsourcing market is segmented into IC Engine and electric.

Trends in propulsion:

• Improving ICEs for reduced emissions to comply with ever-tighter regulations. This encompasses after-treatment technologies, combustion enhancement, and alternative energy sources.
• Regulations are significantly influencing the advancement and acceptance of various propulsion technologies.
• Thus, based on the above factors, such as growing technological advancements and sustainability initiatives would further drive the market during the forecast period.

The IC Engine segment accounted for the largest revenue share in the year 2024.

• The integration of internal combustion engines (ICEs) with electric motors (hybrid and plug-in hybrid vehicles) is an important trend. ESO providers knowledgeable in both ICE and electric powertrain technologies are highly sought after.
• Rather than developing entirely new ICEs, a large portion of the ESO efforts concentrates on enhancing and optimizing current engine platforms to comply with new regulations and enhance efficiency. This approach is more cost-effective.
• These factors and analysis in IC engines segment would further drive the market during the forecast period.

The electric segment is anticipated to register the fastest CAGR during the forecast period.

• Quick progress in battery technology, electric motors, power electronics, and charging systems is fuelling innovation within the EV sector.
• The existence of charging stations plays a vital role in the uptake of EVs, leading to considerable investment in the development of charging infrastructure.
• Electric vehicles are increasingly dependent on software, which makes skills in software engineering essential.
• These advantages are anticipated to further drive the global market during the forecast period.

By Application:

Based on the application, the market is segmented into autonomous driving/ADAS, body & chassis, powertrain and after-treatment, infotainment & connectivity, logistic and supply chain, and others.

Trends in the application:

• The presence of inexpensive, educated, and semi-skilled workers in India renders it an appealing choice for global OEMs looking to outsource their activities. Numerous companies are concentrating on collaborations to create sustainable mobility solutions and pioneer the next generation of electric vehicles, autonomous driving technologies, and mobility service applications that can offer value to consumers in the mobility sector.
• The proliferation of autonomous driving/ADAS is expected to expand considerably during the forecast period due to its capacity to perceive and identify its environment while ensuring safe transport. ADAS encompasses various sensors like LIDAR, GPS, radar, inertial measurement units, among others, which supply advanced sensory data and control system integrators for navigating roads.
• Thus, growing advancements in ADAS and autonomous driving would further supplement the automotive engineering services outsourcing market trends during the forecast period.

The powertrain and after-treatment segment accounted for the largest revenue share in the year 2024.

• This segment considers engineering services contracted out for hybrid and electric drive systems, as well as the ongoing enhancement of current engine systems. It covers services outsourced for exhaust management, engine optimization, engine downsizing, electrification of the drivetrain, and lowering emissions.
• Moreover, there is a significant surge in need within the industry to reduce engine dimension, resulting in decreased fuel consumption. Due to these factors, the powertrain and after-treatment sector is projected to maintain its leading position over the next seven years.
• The heightened regulations enforced by governments globally for diminished CO2 emissions have contributed to the increasing appeal of powertrain electrification.
• These advantages are anticipated to further drive the global market during the forecast period.

The infotainment & connectivity segment is anticipated to register the fastest CAGR during the forecast period.

• The progression of the segment can be attributed to the growing desire among end-users to integrate sophisticated digital solutions into vehicles.
• Connected vehicles provide access to movies, social media, music, voice commands, and additional functionalities, thus creating prospects for ESPs.
• Furthermore, the incorporation of cutting-edge technologies such as AI, machine learning, and voice recognition has rendered infotainment systems more user-friendly and reactive, boosting the need for these capabilities.
• IoT facilitates communication between connected cars and various devices and services, enriching infotainment systems with real-time information, vehicle diagnostics, and remote operation features.
• For instance, in January 2025, Tata Technologies announced the partnership with Telechips, to modernize vehicle software solutions for next-generation software-defined vehicles. Together, they strive to create cutting-edge solutions for automotive cockpit domain controllers and ADAS platforms, which will expedite the development of software-defined vehicles (SDVs). The partnership will leverage Tata Technologies’ integration of next-generation technologies for comprehensive SDV creation, alongside Telechips' semiconductor technologies, which encompass AI Vision ADAS Processors, Network Gateway Processors, and SoCs (System on Chips).
• These advantages are anticipated to further drive the global market during the forecast period.