Software-defined vehicles could generate over $650 billion for the auto industry

The automotive industry is undergoing an upheaval as two previously distinctive industries- automotive and technology- converge quickly. By 2030, Software-Defined Vehicles (SDV) are expected to contribute 15 to 20% of the value of vehicles and will generate over $650 billion.

The Boston Consulting Group’s research emphasizes that OEM revenues from automotive software and electronics will increase almost three times, from $87 billion to $248 billion. In addition, the software and electronics market will nearly triple from $236 billion to $411 billion. 

“The magnitude of change the Software-defined vehicles represent cannot be overstated. Software changes the source of competitive advantage at the heart of the product, the way and speed at which innovation is achieved, the role of firms and entire industries in making the car, and the relationship to the end user,” said Alex Koster, a BCG managing director, and senior partner and global lead for the firm’s automotive technology business. 

Koster adds, “More than ever, integrating the DNA of automotive and technology sectors will be necessary to realize the SDV and crucial capabilities like improved driver assistance. Both industries must start immediately by determining their appropriate roles in this new environment.”

Furthermore, partnerships have historically been scarce because most businesses focused on creating unique solutions to seize potential control points. Yet, due to ecosystem dynamics and technology complexity, future stages will require cross-industry collaboration and partnering to expand, increase safety, and satisfy customer demands. However, forming partnerships and alliances with all vehicle levels will be essential.

Five Essential Tips for Industry Players

1. The industries’ SDV transformation is clouded by complexity, and cross-industry collaboration will be vital to regaining scale.
2. Collaboration should begin with a standardized, cross-industry tech stack taxonomy.
3. Industry collaboration accelerates interoperable platform development, boosting industry profitability.
4. Diverging regional innovation rates, user realities, and laws necessitate regional collaboration clusters.
5. Firms must strengthen their internal and external collaborative muscles to thrive in a partnering-first world by embedding them in their operating strategy.