AUTOMOTIVE ENGINEERING SERVICES MARKET Challenges and Opportunities

The automotive engineering services market is facing significant challenge due to high cost associated with the implementation of new technologies. Original equipment manufacturers and tier 1 suppliers require advanced engineering capabilities to develop autonomous, connected, electric, and shared mobility solutions. However, building internal infrastructure and expertise for new technologies such as autonomous driving, vehicle connectivity, advanced driver assistance systems, EV batteries, and fuel cells require massive capital investment. Transitioning to newer technologies also require re-training existing workforce which further increases operating expenses. Due to expensive nature of technology upgrades, many small and medium sized component manufacturers find it difficult to individually invest in research and development of novel automotive technologies.

Market Opportunity - Demand for Engineering Services from Tier II and Tier III Suppliers for Market Expansion

The automotive engineering services market is presented with tremendous opportunity in the form of growing demand from tier II and tier III suppliers. As vehicle architecture is becoming more complex with integrated electronics, software, and new mobility solutions, component original equipment manufacturers are required to develop application-specific innovations. However, internal capabilities of small and medium suppliers remain limited for such complex product development projects. In order to gain orders from global OEMs and expand markets overseas, these smaller suppliers increasingly outsource product design, testing, validation and certification activities to specialized engineering consultancies. Emerging technologies also drive many Tier II and III firms to engage external expertise. This translates into greater outsourcing of engineering work and projected growth of the automotive engineering services industry.