The global engineering services market for automotive is forecast to grow 5-6% annually until 2020 reaching approximately $16.5 billion. Engineering service providers need to develop specialized expertise in key areas like powertrains and connectivity and have operations in low-cost countries to remain competitive. Outsourcing of engineering services is expected to slightly decrease for automakers in Europe and China.

1. Andelkovski MDI Advisory
Top 10 Engineering Service Providers
Andelkovski Automotive Advisory
Market Intelligence
info.AAA@gmx.ch

15. The market of engineering services is growing by 5-6% CAGR until 2020 – ESPs need
to have a best-cost-country footprint
The global automotive ESO market was estimated at approx. EUR 10.7 bn in 2012 – overall growth has been
slowing down. Global passenger and light commercial vehicle production is forecast to increase about 4% p.a.
until 2020
Global automotive R&D expenditures are forecast to grow at approx. 6.7% p.a. until 2020 – outsourced share is
expected to slightly decrease
The global automotive ESO market is forecast to grow by 5% to 6% p.a. until 2020, at approx. EUR 16.5 bn
ESPs need to clearly define their USP and have a best-cost-country footprint in order to stay competitive on the
ESP market
Especially in Germany, OEMs need to ensure that they are able to outsource engineering services effectively
and ensure compliance
AutomotiveExecutive Management Summary

16. Automotive OEMs have to deal with an all-time high of technology complexity, driving engineering spend and
creating the necessity to have a clearly defined strategy regarding core competences and outsourcing of
engineering services
Three areas see a dramatically increasing demand for ESO skills and capacity: Powertrain and powertrain
electrification as driven by CO2 emissions regulations in Europe and China
Weight reduction technologies as driven in the same context, especially on the European market
Connectivity and IVI-related engineering services as especially driven by customers' "always on" attitude
In total, the global automotive ESO market is forecast to grow by 5% to 6% p.a. until 2020, totaling at approx.
EUR 16.5 bn – growth is mainly driven by Chinese market while slowing down in Europe
Highest share of outsourced work in Europe (approx. 30%) in E/E, also incl. connectivity/In-Vehicle-Infotainment,
in China around power train/powertrain electrification (approx. 25%)
For ESPs, the main challenge will be to have a best-cost-country footprint (e.g. with a hub in China or India) in
order to stay competitive in terms of their cost structure and to develop specialized know-how in the growing
ESO areas
AutomotiveExecutive Management Summary

17. ESPs need to clearly define their USP and have a best-cost-country footprint in order to
stay competitive on the ESP market
Challenges for ESPs:
For the ESPs, the main challenge will be to have a best-cost-country footprint (e.g. with a hub in China or India)
in order to stay competitive in terms of their cost structure
Opportunities in low-cost countries are also driven by captive engineering centers increasingly being used to
develop subsystems and derivates resulting in a lowering of the ESP market esp.
in Europe Project-based service contract will allow that more easily, but at the same time provide an opportunity
for especially the large Indian players, who all try to enter the European market with massive efforts
It is therefore also very important for the ESPs to clearly define their USP based on specialized know-how e.g. in
the areas of powertrain or material know-how in terms of weight reduction technologies on the highly competitive
market as competition, especially from low-cost countries, will increase
AutomotiveExecutive Management Summary

18. The global automotive ESO market is forecast to grow by 5% to 6% p.a. until 2020, totaling at EUR 16.5 bn
AutomotiveExecutive Management Summary

19. Opportunities for ESP can be found in all domains – specialized know-how as necessity to benefit from
automotive trends
AutomotiveExecutive Management Summary

20. Especially in Germany, OEMs need to ensure that they are able to outsource engineering effectively and ensure
compliance
AutomotiveExecutive Management Summary

21. Disclaimer:
All written material (documents) and verbal material (consulting calls) are based on information collected within the public domain and on
assessments of Industry experts within the advisors professional network. The advisor prepared this Material utilizing reasonable care and skill
in applying methods of analysis consistent with normal industry practice. All results are based on information available at the time of review.
Other information, including government sources, trade associations or marketplace participants, may have provided some of the information on
which the analyses or data is based on. All written material is containing forward-looking statements and information on the business
development of any Industry/market place participants. These statements may be spoken or written and can be recognized by terms such as
“expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “will” or words with similar meaning. These statements are based on
assumptions relating to the development of the economies of individual countries, and in particular of the industry and related market
participants, which the advisor has researched on. The estimates given involve a degree of risk, and the actual developments may differ from
those forecasts.
Consequently, changes in factors upon which the written and verbal material is based on, could affect the results. Forecasts are inherently
uncertain because of events or combinations of events that cannot reasonably be foreseen including the actions of government, individuals, third
parties and marketplace participants. The advisor shall not be liable for any claims whatsoever, whether caused by negligence, errors,
omissions, strict liability, or contribution, or any unexpected fall in demand or economic stagnation in key sales markets. The same applies in the
event of a significant shift in current exchange rates relative to the US $ or EURO.€, such like Swiss Fr, British £, Japanese ¥, Brazilian R$,
Chinese RMB.¥, Indian ₹, Czech Kč and other foreign important trade valutas. If any of these or other risks occur, or if the assumptions
underlying any of these statements prove incorrect, the actual forecasts made within the consultancy service significantly differ from those
expressed or implied by such statements.
The advisor does not update forward-looking statements retrospectively. Such statements are valid on the date of documentation and can be
superseded. The written material and verbal material is provided for the sole benefit of the client and, unless otherwise approved in a written
statement by the advisor, are non-transferable, non-assignable, and are for clients” internal use only”.
This information does not constitute an offer to exchange or sell or an offer to exchange or buy any securities!
Thank you for your Attention!
Zivko Andelkovski
Independent Advisor
info.AAA@gmx.ch