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Outsourcing design and engineering tasks in product development is increasingly popular. However, firms that outsource design and engineering tasks often experience problems. So far, no satisfactory answer exists regarding the question to what extent design and engineering tasks can be outsourced before negative consequences occur. We address this gap. This paper identifies the limits of design and engineering outsourcing in product development, and the sources of these limits. To do so, it investigates the organizational challenges that a major European automotive manufacturer faced when it decided to adopt an extreme form of design and engineering outsourcing. Based on an in‐depth case study, we identify the sources of problems with outsourcing design and engineering tasks in product development, and shed light on the limits of design and engineering outsourcing in product development.