Since the promise of software-defined vehicles (SDVs) is starting to take shape, what have the recent sights for car manufacturers been about their transition to SDVs?
The introduction of updates about the air (OTA) has been one of the most important moments in recent years, said Jürgen RERS, Global Automotive and Mobility Lead on Accenture in an e-mailed response to questions.
“What used to be a concept is now something that customers experience every day. A new position, a performance consumption or a bug fix – without physical dealer visit and not a downtime involved.”
In essence, every large car maker now uses OTA updates. This has activated a shift from hardware defined to SDV architectures. These architectures make platforms possible that combine electric power lines, automated driving, in-car experiences and connected ecosystems.
Register for the Automotive News Europe Focus on Technology Weekly newsletter and looks at progress in all aspects of the vehicle, including performance, autonomous driving, batteries and more.
In the future, this means faster development cycles, lower costs and more flexibility for both car manufacturers and suppliers.
The estimated value of SDVs is more than $ 1 trillion by 2036
The concept of SDVs will continue to evolve as the industry continues to shift, Gartner Vice -President told Pedro Pacheco research to Automotive News Europe. It is no longer a case of SDVs and non-S-S-SDVs in the market, but rather vehicles that are more or less defined.
In general, the SDV market promises exceptional potential and will grow $ 470 billion in 2026 to $ 1.19 trillion in 2036, according to a report of research and markets.
According to Pacheco, the SDV concept offers potential for two important reasons. 1) Most car manufacturers still have to introduce a competitive product from both hardware and software perspectives.
2) There is still much to be achieved before everything in a vehicle can be defined real software.
REERS sees the potential to make money on digital services, to update safety and performance without hardware returns and ultimately switch to a more software valley product cycle as ‘huge’.
On the positive side, artificial intelligence (AI) supports the shift to SDVs, so that an extra layer of intelligence is added to improve what software can do for a car and its occupants. AI speeds up the battery design, optimizes battery management systems and ensures advanced vehicle software development.
Concepts such as Agentic AI help car manufacturers to transform vehicle design, operation and integration into design ecosystems, Rent added: “As a cognitive brain that continuously learns from its environment, road conditions and driver’s behavior.”
China’s ‘Fail-Fast’ Mindset Putten gives them SDV benefit
That said, there are still a few challenges.
This includes overcoming financial pressure. “The in advance investments to build an SDV are considerable, and many car manufacturers still have to see a clear return. For companies that are already struggling with margins, this makes it difficult to double and commit,” said Rers.
Fierce competition from China also gives Western car manufacturers a headache.
“The investment of Chinese car manufacturers in digital simulation and a ‘fail-fast, technology-first’ mindset is really putting them ahead on SDV maturity,” said Rers.
What is more, the Chinese are ahead in terms of the speed with which they develop digital technology and market cars, Pacheco said. “This has definitely been an eye-opener for many people in the industry,” he added.
The production version of VW’s ID Every1 Electric Minicar will be launched in 2027 as the first software -defined vehicle of the group.
In the meantime, one of the biggest disappointment in recent years has been how different legacy car manufacturers have not succeeded in getting great control over vehicle software.
Instead, several had to resort to buying hardware and software from new established car manufacturers, making them the risk of becoming too technologically dependent, Pacheco said.
Volkswagen Group, who has seen its internal software-arm cariad struggle, was shortened for a year to offer its first SDV. The biggest reason why VW Group is cited for this is the partnership with the American electric vehicle maker Rivian.
The production version of VW’s ID Every1 Electric Minicar will be launched in 2027 as the first software-defined vehicle of the group, said VW brand CFO David Powels on the 2024 profit call on March 13.
Why the SDV transition requires a change in mentality
Moreover, many car manufacturers still have trouble being separate from Legacy Mindsets, which still strive for technical teams, supplier-driven development cycles and long approval chains.
In other words, it is not just a technological shift, but a cultural and organizational transformation that needs to be achieved, explains RERS.
Suppliers are often stopped by Automaker requirements that are not always coordinated and tool chains that are not well connected to each other.
Partnerships, for example in shared platforms or shared software packs, can be the answer here, RERS said, because “no one can afford to find everything completely again.”
At the same time, car manufacturers are starting to realize that SDV success is not about selling a vehicle with great technology, but rather about managing that vehicle as an evolving digital product for at least a decade, supported by cloud infrastructure and continuous support of developers, REERS added.
Ultimately, excitement about the SDV transformation was merged with realism.
Said Reers: “The people I trust say: the potential is huge, but we have to be serious about the basics – shared standards, product -Oops for vehicles and reconsider how we build, send and support software throughout the ecosystem.”
