According to IBM's latest Automotive 2035 study, 74 percent of executives surveyed believe that by 2035 vehicles will be software defined and AI powered. The IBM Institute for Business Value published its fourth edition of the automotive industry longitudinal study, which outlines a transformative decade ahead for the automotive industry, driven by electrification and software-defined vehicles (SDVs).
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Key Trends Shaping the Automotive Industry
The study, based on 1,230 interviews with senior executives from OEMs, suppliers, and related industries across nine countries, highlights that over the next decade, 80 percent of new cars will have a powertrain that will be electrified to some extent.
The findings also reveal the following key trends by 2035:
Software-Defined Vehicles: 74 percent of executives believe vehicles will be powered by software and AI.
Brand Value Shift: 75 percent of respondents say a software-defined experience will be central to brand value.
Revenue Model Change: The industry is shifting from one-time vehicle sales to recurring digital service revenues.
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"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 at IBM.
Industry Preparing for Digital Capabilities
The study highlights that the industry is preparing to offer deeper, more personalised user experiences that are enabled by digital capabilities. Currently, 21 percent of research and development budgets are currently allocated to software and digital developments, but respondents expect this to nearly triple to 58 percent by 2035.
The study also highlights critical challenges in the transition, with 77 percent of executives reporting a lack of software development tools and 74 percent citing difficulties due to a mechanical engineering-driven culture. To meet the demands of SDVs, automakers must overhaul their electrical and software architectures, moving away from traditional, siloed approaches.
However, the technical challenge of separating the software and hardware layers is seen as the top challenge.
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Role of AI and Cloud in Enhancing SDVs
Jeff 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."
