Deloitte’s timely survey of 141 automotive industry experts provides insight into how companies are moving forward. By identifying the latest trends, strategies, challenges and catalysts, the survey authors assessed the industry’s progress toward software-defined vehicles (SDVs).
Automakers are being given a clear message: adapt or risk being left behind. The initial stretch of the road to SDV is already seeing strong investment, encouraging adoption trends, and sound strategies. But as momentum builds, companies need to accelerate transformation to become leaders in the battle for a software-driven future.
Deloitte’s study, “’x1’ Surveying the Road: Exploring the Transition to Software-Defined Vehicles in the Automotive Industry,” examines this transition by gathering information from 141 experts from original equipment manufacturers (OEMs) and suppliers in Germany, France and the United Kingdom. The findings provide a timely overview of the latest trends, corporate strategies, challenges and catalysts driving the emergence of SDV.
Recent SDV trends.
Survey results indicate significant momentum in SDV adoption, with 43% of respondents expecting widespread SDV adoption within 5 years. Another 47% believe it will take 5-10 years for SDVs to become mainstream. With predictions that such vehicles will account for more than 90% by 2029, it is clear that SDVs are approaching a tipping point that will lead to the disruption of the traditional car market.
This growth is driven by growing consumer demand for a variety of software solutions ranging from interior personalization to driver assistance and entertainment. Over-the-air (OTA) updates are also becoming more prevalent as continuous in-vehicle and autonomous capabilities are introduced in vehicles. As electric and software-defined vehicles become more interconnected, automakers must adapt to changing consumer expectations.
Strategies companies are employing.
89% of survey respondents confirm that SDVs already play an important role in their corporate strategy. Another 10% indicated that SDVs have at least some strategic importance today. With such unanimity, companies are clearly taking steps to embrace software-defined transformation and build an emerging mobility ecosystem.
Their prioritized strategies for the next 12 months reflect this proactive stance. Increasing capital expenditures is a top priority for 74%, indicating major investment in developing programmatic capabilities and strengthening competitive positioning. Organic expansion, new product/service launches, social responsibility management and risk mitigation were also cited as priorities by more than 60% of respondents.
While these disparate efforts indicate a desire for SDV leadership, European companies are more hesitant to pursue acquisitions, with only 34% of respondents citing this as a top priority. Nevertheless, the wide range of strategic challenges indicates that automotive companies are realizing the scale of resources and transformational change required to capitalize on a software-driven future.
Challenges associated with achieving scale.
Realizing these ambitious SDV strategies will require overcoming key barriers related to complexity, cost, and security. Survey results indicate the significant investment required to build software in-house, with estimates that it could be as high as $2.7 billion per year per automaker. 52% of respondents have already allocated more than 15% of their total investment to SDV development.
Managing the proprietary operating systems underlying SDVs is also costly for 65% of respondents. While important for differentiation, proprietary systems create additional complexities that may prompt greater standardization. Along with cost, data security and privacy represent another major scaling challenge, according to 74% of respondents. Because SDVs generate huge amounts of sensor data, automakers must protect sensitive information to gain the trust of consumers and stakeholders.
Addressing these obstacles will require resources and partnerships to develop secure and flexible SDV platforms while controlling cost and complexity. Integrated solutions will be needed for automakers to balance custom development and standardization, internal development and external collaboration, and innovation and pragmatic implementation.
Catalysts accelerating the transition to SDV.
While there are significant barriers, the survey results also point to catalysts that can accelerate SDV adoption. The vast majority believe that software-defined vehicles will improve efficiency and reduce time to market, a critical advantage in a rapidly shortening product lifecycle.
83% believe SDVs will reduce time to market through agile development, continuous delivery and rapid integration of new features. Another 95% expect efficiency gains through an updated architecture that provides centralized control and data-driven optimization. Given that for 50% of respondents, SDV is already generating more than 15% of revenue, the business case for investment is compelling.
Collaboration is also an important factor, with 92% of respondents agreeing that SDV development depends on partnerships to share costs. Open ecosystems will be critical to bring together resources and capabilities of all stakeholders. Policies such as expanding communications infrastructure, encouraging pilot projects, and simplifying regulatory approvals could further stimulate SDV development.
Automakers seem to be behaving rationally, adopting strategies in line with theoretical and market expectations. Despite the complexity of SDV transformation, most respondents have already made some progress, which is an encouraging sign of the industry’s proactive stance. While the automotive landscape in 2030 will undoubtedly be dramatically different from today, current trends show that companies are taking the necessary steps to shape a program-defined future.
This study provides invaluable insight into the real-world changes taking place as smart mobility revolutionizes the automotive sector. By highlighting the latest developments in SDV and examining the readiness of incumbent companies for them, it provides an assessment of the industry’s transition and its own progress. For automakers, the study confirms the need to invest in software development before the window of opportunity closes. Software-defined vehicles are on the horizon, and the pace of development is accelerating rapidly. Automotive companies must accelerate even more if they hope to navigate the upcoming twists and turns and cross the finish line as leaders of the software-driven future.
Daniel Davenport is an Atlanta-based automotive expert specializing in software-driven vehicles, connected mobility ecosystems, and smart manufacturing. With nearly three decades of experience, he currently serves as a Hybrid Network and Cloud Solutions Specialist at NTT and is an AWS Certified Cloud Specialist.