Alastair has over 10 years’ experience leading research activities in scaled, high-growth industrial and technology markets. At Interact Analysis he is responsible for electric trucks and buses, autonomous trucks and off-highway electrification.
Interact Analysis has just published new research into the global automotive design, test and simulation market. A new, innovative market categorization developed based on feedback from industry participants by Interact Analysis, it not only includes traditional PLM tools like CAD, CAM, PDM and FEA, but also test software and hardware and advanced simulation tools used for developing autonomous cars. Given how the automotive market is reacting to three mega-trends – electrification, autonomy and mobility – design, test and simulation are no longer consider as separate silos/tools. Many OEMs and suppliers now consider simulation as core to the design process, particularly when implementing autonomous technology.
The global market for automotive design, test and simulation solutions was estimated to be worth $5.1 billion in 2018, $5.6 billion in 2019 and is forecast to be worth $8.6 billion in 2023, growing at a CAGR of 11%. This compares very favourably with the outlook for global automotive production taken from the Interact Analysis Manufacturing Industry Output Tracker, where revenue growth is forecast to be low single-digit over the next 5 years:
The Top 13 vendors of automotive design, test and simulation solutions (including hardware) are, in alphabetical order:
Siemens Digital Industries Software and Dassault Systemes dominate the market with a combined market share of very nearly 50%. This dominance has existed for several years and continues to be fueled by acquisitions, new product launches and new business models.
In a dynamic (almost turbulent!) automotive market, is it reasonable to expect the two titans – Siemens and Dassault – to retain their leadership positions?
Giants and their slayers?
In some ways, it shouldn’t be surprising that the likes of Siemens and Dassualt dominate the market and continue to do so. They have the deep pockets to be able to acquire rivals, and industry experience to develop new products for their large customer base, and pivot business models.
However, can this dominance be maintained over the long term? Threats come from the following areas:
- Fast moving start-ups, particularly in simulation – with huge capital expenditure flowing into vehicle automation, a large number of start-ups have emerged focusing on vehicle simulation to speed up the process of autonomous vehicle testing and validation. If a start-up vendor is able to able to exploit this growth and capture significant revenue, it may begin to compete against the leading vendors and capture market share.
- Do-It-Yourself attitude in automotive start-ups – whilst many new entrants in the automotive industry are happy to use off-the-shelf design tools, many have a ‘DIY’ attitude and are looking for ways to solve problems quickly and cheaply by themselves. Many of the ‘legacy’ design tools are also anathema to developers/coders hired to work on software development, requiring steep learning curves and data siloed in many different, proprietary formats. As an example, many developers are well-versed in Python, Java, C++, etc. However, they may not be familiar with Matlab (Mathworks), LabView (NI) and the platforms/programs that vendors offer. Develops may find it quicker to develop their own solutions rather than try to develop mastery on new tools that might not integrate with their own, complex systems.
- Another ‘acquisitive’, breakout company – Hexagon AB has the appetite and portfolio to be able to grow, through acquisition, into a company rivalling Siemens and Dassault. In the last 3 years it has acquired:
- MSC Software (modelling and simulation)
- Volume Graphics (CT software)
- AMendate (generative design)
- Bricsys (CAD)
- Spring Technologies (CAD/CAM)
- AutonomouStuff (autonomous vehicle development tools)
In all likelihood, the likes of Siemens and Dassault can (and will) acquire start-ups in a bid to maintain market share and offer their customers new solutions. In addition, as automotive start-ups grow their appetite to use internally derived tools (the ‘homebrew’ approach) will likely diminish, and push them to use standard, off-the-shelf tools.
We are of the opinion that companies like Hexagon AB represent the greatest potential threat to Siemens and Dassault. Not only is it expanding its portfolio coverage but it is an additional rival for the pipeline of start-ups and SMBs that those two companies rely upon to remain competitive.
Growth is long-term, but coming from new products and users
The global market for automotive design, test and simulation is forecast to grow at a CAGR of 11% out to 2023. However, this growth varies by solution type and region/country.
Global advanced driver assistance systems (ADAS) simulation software and hardware revenues are forecast to grow at a CAGR in excess of 50% over the next 5 years. By comparison, revenues from traditional design tools like CAD/CAM will grow at less than 10% per year on average.
The Americas will be the fastest growing region out of the 3 major regions (Americas, APAC, EMEA) – with a CAGR over 11% – over the next 5 years. This is due to heavy investment into electrification and vehicle autonomy, with most major vehicle autonomy programs happening in the US.
Revenues from products sold in China will grow at over 12%, despite a weakening automotive market. Increasingly sophisticated vehicle designs and technology and a focus on autonomy will help to fuel growth in the automotive design, test and simulation market.
Gambits – flexibility and one-stop-shop
Major vendors of automotive design, test and simulation solutions have a few levers they can pull to remain competitive and present a changing automotive landscape with the tools it needs:
- Flexibility. Vendors like Dassault, PTC and Siemens now offer subscription–based offerings with flexibility in terms of what can be used, for how long, and for what purpose. This is great for small companies who can choose elements that match their budget and fast, project related goals. For larger companies there can be better, structured management of which teams and members of staff need which tools and resources. This aids cost control and helps maximise team efficiency.
- One-stop-shop. Some vendors, most notably Siemens, are aiming to be a single source for all design, test and simulation tools, for all automotive applications – mechanical, electronic, fluid, etc. The aim here is to ‘lock out’ other vendors.
Interact Analysis Key Takeaways
- The automotive PLM market is going through a period of rapid growth and change. Opportunities abound for established and emerging vendors.
- Flexibility will be a key advantage – both in terms of product offering and pricing/license models.
- Siemens and Dassault should heed what the competition is doing, particular some of their near rivals who are acquiring additional capabilities.
The automotive design, test and simulation solutions market is, to a degree, a new concept created by Interact Analysis. It combines traditional software design tools such as product lifecycle management (PLM) with test solutions and new, advanced simulation tools being used to model autonomous vehicles and their behaviour.