Over the next decade, 80% of new cars will have a powertrain that will be electrified to some extent, according to the Automotive 2035 study from the IBM Institute for Business Value.
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 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 GM at 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 & 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. The technical challenge of separating software and hardware layer is seen as the top challenge. 77% of the senior executives say they are facing 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 added, "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."
Methodology: The IBM Institute for Business Value (IBM IBV), in cooperation with Oxford Economics, surveyed 1,230 C-level automotive executives in nine countries in Q3 2024. 40% of the sample represented automotive OEM and EV companies, 40% auto suppliers, and 20% ecosystem players. Participants were asked a range of questions in various formats. They were asked about their organization's expectations, results, concerns, and barriers for transition to software-defined, electrified future.
