Table of contents
Key takeaways
The European testing, inspection and certification (TIC) market comprises businesses engaged in electrical, mechanical and physical TIC services. These services are offered to businesses that need to adhere to statutory requirements (“first-level”) or to signal the quality of products with third-party approvals (“second-level”). We segmented the market by customer industries intro (i) generalist, (ii) automotive, (iii) food & life sciences and (iv) energy & industry.
European businesses dominate the global market thanks to standardised cross-border regulations and a high degree of TIC outsourcing. Despite the presence of multiple large incumbents, the long tail of the market remains highly fragmented, allowing for further consolidation.
Wide scope for M&A plays, increasing regulatory complexity and the resilient nature of market demand encourage strong interest from investors in the market. Nevertheless, the increasing competition for high-growth digital niches, services commoditization and scarce talent availability will pose difficulties for incumbent players in the coming years.
Company benchmarking
Market growth
The global TIC services market was estimated at ~$100bn in 2020 and is projected to grow to ~$122bn in 2025 at a CAGR of 4.0% (Raymond James, 2020)
The global automotive TIC market turned over ~$16bn in 2019 and is expected to grow at a CAGR of ~5.0% in 2020-2024 (Technavio, 2020)
The industrial TIC market was worth ~$30bn in 2020 and is predicted to grow at a CAGR of 5.5% in 2021-2025 (Raymond James, 2020)
Positive drivers
Clients’ outsourcing of TIC for better cost efficiency will significantly expand the total addressable market, with in-house TIC representing ~60% of the market today (Bureau Veritas, 2021; interview by Gain.pro)
Two-way upside from technological and software-driven advances as new niches (e.g. in-house testing applications) open up and TIC applications move to higher-margin systems and processes (interview by Gain.pro)
Upsell and lock-in potential from identified assets becoming one-stop TIC shops. While clients prefer one central point of contact, this also allows assets to scoop up macro- and demographic-wide demand from energy transition (e.g. new certifications) and population ageing (e.g. more stringent inspections) (interview by Gain.pro)
Negative drivers
Technology-driven disintermediation risk. First, consultancies and Big Tech are penetrating the increasingly digital TIC niche (BCG, 2018) wherein end-customers focus more on peer product reviews than quality certifications (interview by Gain.pro). Second, the improving quality of remote inspections will make clients realise they can execute them in-house
Inability to keep up with higher demand as players are capped by the rising shortage of technical personnel across technical industries, while existing workforces continue to age year-on-year (interview by Gain.pro)
Trade regionalisation will limit the number of high-volume product orders and reduce demand for international quality approvals, while standardisation of EU norms will lead to more global competition (interview by Gain.pro)
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