Automotive ER&D Services

Digital engineering is expected to be a major driver of global automotive ER&D spending, as the industry undergoes a significant shift toward electric vehicles (EVs), autonomous systems, and connected technologies. This transformation is fueling increased investments across innovation and development initiatives. Notably, nearly half of the total automotive engineering spend is now concentrated in CASE mobility areas-Connected, Autonomous, Shared, and Electric—highlighting their growing importance. Furthermore, ER&D spending in these CASE domains is projected to grow at a much faster pace compared to non-CASE related engineering, underscoring the industry’s strong focus on next-generation mobility solutions.

Highlights

• Cost savings and a shortage of digital engineering talent are expected to drive increased offshoring, with the share of offshoring in automotive ER&D spend projected to rise from 17% in 2022 to 20% by 2032.
• Legacy auto OEMs are reprioritizing their tech spends, as they compete with not just other OEMs but also with disruptor players and even tech companies, and have increased commitments towards EVs and digital technologies (~50 70% of overall spend) to make up for lost market share.
• With most of the traditional skill set being ICE based, shift towards EVs and Connected vehicles has created supply side constraints for OEMs and Tier 1 Suppliers from a talent standpoint.
• India’s share in Global Auto ER&D offshoring is expected to increase from 25% in 2022 to 33% by 2023, growing at a healthy CAGR of 11%+ . Majority of this increased share would be captured by the ESPs, whose share is expected to increase from 51% in 2022 to 55% by 2032.
• Offshoring to ESPs in countries like India offer significant cost saving opportunity to clients. An offshore resource costs 1/5th of an onshore resource Thus, a higher offshore mix can provide significant margin expansion to clients.