Research released by the IBM Institute for Business Value reveals an auto industry grappling with an erratic transition away from current products and business models.
A study by the IBM Institute for Business Value highlights that over the next decade, 80% of new cars will have a powertrain that will be electrified to some extent, according to respondents.
The findings also reveal that:
- 74% of executives surveyed believe that by 2035 vehicles will be software defined and AI powered
- 75% of respondents say the software-defined experience will be the core of the brand value
- The auto industry is trying to shift its business model from one-time car sales to a recurring revenue model for digital services and products
The study is a data-led analysis of automotive and mobility industries developments over the next 10 years and is based on 1,230 interviews with senior executives from automotive OEMs, suppliers and surrounding industries across nine countries.
“The shift to software-defined vehicles (SDVs) was cited by the majority of industry executives as the key to future brand developments,” said Jeff Schlageter, Automotive Industry General Manager IBM.
“It is indicated that vehicle value may no longer be limited to initial features and functionality – it would be earned over the life of the vehicle by continuously providing superior customer experiences with new applications and subscription-based services for drivers.”
The study highlights that the industry is preparing to offer deeper, more personalized user experiences that are enabled by digital capabilities. Currently just 21% of research and development budgets are currently allocated to software and digital developments – but respondents expect this to nearly triple to 58% by 2035.
The research also reveals gridlock at the heart of SDV developments. The traditional approach to vehicle architecture—where software for a single domain (such as brakes) is delivered separately from another domain (such as airbags) through individual electronic control units (ECUs) – is no longer sustainable for the SDV era.
To reach a future where cars are truly digital products, automakers need a sweeping overhaul of current electrical and software architectures.
Separating the software and hardware layer is seen as the top technical challenge with 77% of the senior executives saying they face a lack of software development tools and methodologies. Of equal concern, 74% of respondents say a strong mechanical-driven culture is making it difficult to switch to a software-driven product development.
Schlageter said: “By harnessing the power of cloud combined with AI, automakers can explore new ideas, test different software configurations and gather valuable insights to inform the development of innovative SDV features. Using AI to analyze vast volumes of data, identify patterns and make predictions, automakers can accelerate SDV enhancements and create personalized experiences for customers.”
