The future of cars is software-defined—and automakers are all in

An IBM study reveals that the future of the automotive industry will be heavily driven by software-defined vehicles (SDVs) as the technology continues to evolve—even though the pace of EV sales seems to be slowing.

First things first: The IBM study—drawn from a survey of 1,200 global industry executives – projects that over the next decade, 80% of new cars will feature an electric powertrain, paving the way for the wider application of software in vehicles.

• 74% of the executives surveyed in the study believe that by 2035, vehicles will be software-defined and AI-powered—with the technology extending well beyond simply in-car experiences.

• 75% of the respondents expect software-defined experiences will be the core of an automotive brand’s value by 2035—measured by a company’s ability to deliver cutting-edge technologies and services. 

• SDVs growth potential is driving auto executives to nearly triple their R&D budgets of software and digital investments from 21% to 58% in 2035.   

Zooming in: The shift to software-defined vehicles is being driven, in part, by the revenue that SDV features could potentially yield down the road, spanning autonomous driving to immersive in-vehicle entertainment. Markets and Markets peg the projected market growth of software-defined vehicles from $146.7 billion in 2024 to $1.16 trillion by 2030 at a CAGR of 41.1%. However, the approaches being taken now to capitalize on those opportunities vary.      

• 59% of automakers are preparing for a wide range of offerings tied to software-defined vehicles.

• About a third of those surveyed are adopting a “wait-and-see” attitude toward future customer expectations in the space.

• 9% of the respondents expect to focus on tailored customer experiences such as personalized settings and activity recommendations based on a consumer’s lifestyle. 

The business opportunities with software-defined vehicles are prompting some intriguing collaborations like the Hyundai, Kia, and Samsung alliance (announced in October) to develop technology that links vehicles and smartphones using Samsung’s global “Smart Things” platform, as reported by Automotive Drive. 

Between the lines: Despite the opportunities that exist with software-defined vehicles, SDVs do pose a degree of investment risks for automakers, as is typical with any new innovations, especially given the current market climate in automotive.

• It takes time for automakers to yield an investment in software-defined vehicles due to the initial cost and time required. 

• Sales for EVs—which embody many of the features and functionality associated with software-defined vehicles – have been slowing in recent months, prompting many automakers to scale back on their EV plans. 

• The mere mention of a software-defined vehicle and needing to update features raises security concerns, which makes some consumers apprehensive about the idea and services tied to the tech. 

Bottom line: Even with the risks involved, the findings revealed in the IBM study, coupled with the growing number of SDVs initiatives like the one between Hyundai and Samsung, are a clear indication that automakers are still zeroed in on software-defined vehicles.

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