Automotive Software Market Size, Share & Analysis

The global automotive software market size was valued at $19.0 billion in 2023 and is expected to reach $32.3 billion by 2030, at a CAGR of 7.8%, during the forecast period 2023-2030. The amount of software in vehicles has increased exponentially with the growing demand for automotive safety and convenience. This is evident from software used across various new-gen automotive applications, including ADAS/AD, advanced navigation systems, intelligent infotainment systems, and connectivity. New and legacy OEMs are developing their future vehicle lineup using a software-first approach. They have also announced plans to develop specialized software to create new revenue streams based on add-on features for a more customized driving experience. Mercedes Benz, for instance, is targeting USD 1.06 billion from software subscription earnings in 2025 and plans to double its revenue by 2030 with software-based earnings. Similarly, Stellantis plans for USD 22.5 billion in software subscription earnings through value-added services by 2030. Thus, the overall role of automotive software is expected to continue expanding over the forecast period.

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Automotive Software Market Trends Dynamics:

Driver: Advancements in infotainment systems

Increasing competition among automotive OEMs for best-in-class infotainment systems in their latest vehicles is a major driving factor for the evolution of automotive software market. Apart from music and basic navigation, the OEMs have also been working with leading mapping & localization providers (such as TomTom Harman), navigation providers (Android Auto and Apple Carplay), and infotainment system providers to provide best-in-class in-vehicle experience. Modern automobiles have infotainment systems with complex interfaces, smart navigation, larger touchscreen displays, voice assist, smartphone integration, and driver assist systems.

Further, advancements in infotainment systems with a shift to digital cockpits and intelligent AI integration are expected to drive the next generation of infotainment systems. This would be accompanied by shifting consumer demand for smart vehicles and increased comfort systems by integrating value-added services. OEMs are already developing such software for their future vehicle range. As per industry experts, the software will be the primary differentiator among vehicles in the future, while the hardware will start being similar across product ranges with the shift to a modular manufacturing approach.

Restraint: Lack of standard protocols for automotive software systems

Due to the automotive industry using software across applications with multiple interfaces, platforms, technologies, and protocols; there is a lack of standardization among software provided for various applications. This lack of standardization may result in inaccurate data and complex integration of automotive software systems. Software systems with non-standard protocols are also more vulnerable to security threats due to low testing on safety standard protocols. This lack of standardization has slowed automotive software market growth over the years.

Further, automotive software controls a broad range of vehicle functions, from engine and transmission to infotainment systems and advanced driver assistance systems. This makes it difficult to develop standard protocols that meet the needs of different automotive software applications. However, leading automakers are now working on shifting to software-based vehicle architecture, which will lead to the use of zonal and central processing to control the whole vehicle through a well-coordinated software system.

Opportunity: Developments in automated driving and software-defined vehicles

Automakers have started providing automated driving and vehicle safety systems in their vehicles in recent years. This is mainly led by regulations for vehicle safety systems and increasing demand for safer vehicles. This trend has led to over 60% of newly sold vehicles in the US having Level 2 ADAS systems and over 80% coming with at least basic ADAS features in 2023. A similar trend is seen across China, South Korea, Japan, and most European countries. These systems’ function based on inputs from various vehicle sensors, combining their inputs for vehicle and pedestrian safety. During the process, a vast amount of data is generated for implementing such decisions with algorithms in the vehicle's computer system. Hence, automotive software is the key to implementing advanced driver assistance systems in vehicles.

Leading automakers are investing in developing better software for their next-generation vehicles with some degree of automated driving applications. Tesla, for instance, announced plans to invest USD 10 billion in 2024 for automated driving in the coming years. Similarly, in 2023, Mercedes Benz announced an investment of ~USD 68 billion by 2026 to develop automated driving and SDV technology. The major investment in these systems will go towards automotive software, with these companies planning to make software a secondary income source by the end of the coming decade.

Challenge: Risk of Cyberattacks

Automobiles are becoming increasingly prone to cyberattacks, with the growing reliance on software and electronics in vehicles among the interconnected nature of modern vehicles. Attackers can access vehicles by exploiting vulnerabilities in the software to trick drivers into giving them access to their vehicles. Leading stakeholders are working on cybersecurity systems to make automobiles safer by integrating cybersecurity and threat detection systems with analytics and AI. Given the absence of robust capabilities within manufacturing plants, the time lag in rectifying the identified vulnerabilities increases. The timely delivery of the security package during vehicle recalls becomes a significant constraint for OEMs. These factors create challenges for future growth in the automotive software market.

Automotive Software Market Ecosystem

The ecosystem analysis highlights various players in the automotive software ecosystem, primarily represented by OEMs, automotive software developers, automotive software providers, and automotive ECU manufacturers.

ADAS & safety systems segment is expected to witness a significant growth rate in the global automotive software market during the forecast period

ADAS penetration is growing rapidly across most leading auto markets around the globe, with over 40% of all newly sold vehicles being ADAS-enabled in 2023, compared to less than 20% in 2021. This is exceptionally high across the US, China, and Europe, with growing vehicle safety requirements as a regulation for selling vehicles. Further, OEM plans to shift to self-driving vehicle technology, and the government allowing such vehicles on roads will also drive demand. Waymo, for instance, has expanded across the US to provide self-driving vehicle service.

The application software segment is expected to lead the automotive software market growth.

Automotive computing is expanding rapidly in vehicles among various categories of devices such as off-board data processing systems (edge and hybrid cloud), in-vehicle systems (edge and IoT systems), and in-vehicle network systems (security-focused). The shift toward software-defined vehicles has led to advanced software development through collaboration across the automotive, IoT, cloud, and cybersecurity ecosystems. Application software is the topmost layer of automotive software. It supports the architecture and customized functions of the vehicle. These functions include ADAS and safety, powertrain management, infotainment, V2X communication, and vehicle management. Major software developers have designed AI platforms; for example, in November 2021, NVIDIA Corporation (US) developed Drive Chauffeur and Drive Concierge, intelligent technologies that transform the digital experience inside the car. Similarly, companies such as Robert Bosch GmbH (Germany), NXP Semiconductor (Netherlands), Continental AG (Germany), and TomTom International BV (Netherlands) also provide application software layers in the automotive software market.

Body control & comfort systems are expected to have significant growth opportunities in EVs during the forecast period.

Body control & comfort features require a number of ECUs/DCUs in a vehicle. Automotive software is essential for this application, as it helps use various vehicle functions critical to vehicles' drive system. These electronics cover several applications inside the passenger compartment, including automatic HVAC control, seat position, automatic wipers, automatic headlamps, dimming mirrors, windshield anti-fogging systems, central locking systems, climate control systems, air conditioning, and remote keyless entry (RKE) require compatible software modules. Further, in EVs, demand for software is higher, particularly in the body control & software systems application, with increased demand for its use in BMS and vehicle control units. This, along with easier integration of software and electronics in EVs makes EVs the best use case for best-in-class software integration with fewer chips and more centralized control systems. As drivers seek high comfort, safety, efficiency, and consumer features, automotive OEMs are introducing enhanced body control and comfort applications with advanced electronics.

“The automotive software market in Asia Pacific is projected to hold the largest market share by 2030.”

Key regional manufacturers are focusing on strategic partnerships with tier 1 component providers and software providers to keep up with the changing consumer needs. Further, leading technology companies in China are developing software for ADAS systems and connected vehicles. The region is also the software development hub of global OEMs, owing to the lower cost of software outsourcing. This has resulted in competitive OEMs in this automotive software market integrating best-in-class software. In China, the largest automotive market in the region, cars with ADAS have become relatively common, with more than 50% of vehicles coming with ADAS features. Further, domestic automakers such as XPENG, Li Auto, ZEEKR, and NIO are also leading the SDV shift. Similarly, Hyundai from South Korea has also integrated automotive software for ADAS, Connectivity, and other features with OTA updates through its 42.dot subsidiary in the region.

Key Market Players

The automotive software market is dominated by leading tech providers such as Robert Bosch GmbH (Germany), Continental AG (Germany), BlackBerry Limited (Canada), NXP Semiconductors (Netherlands), and NVIDIA Corporation (US).

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Scope of the Report

This research report categorizes the automotive software market based on software layer, ICE application, EV application, vehicle type, and region

Automotive Software Market, By Software Layer:

• Operating System
• Middleware
• Application Software

Automotive Software Market, By ICE Application:

• ADAS & Safety Systems
• Autonomous Driving
• Body & Comfort Systems
• Infotainment Systems
• Engine Management & Powertrain
• Vehicle Telematics

Automotive Software Market, By EV Application:

• Battery Management Systems
• ADAS & Safety Systems
• Autonomous Driving
• Body Control & Comfort Systems
• Infotainment Systems
• Electric Drive
• Engine Management & Powertrain
• Vehicle Telematics

Automotive Software Market, By Vehicle Type:

• Passenger Cars
• Light Commercial Vehicles
• Heavy Commercial Vehicles

Automotive Software Market, By Region

• North America
• Europe
• Asia Pacific
• Latin America
• RoW

Recent Developments

• In September 2023, Bosch showcased its Vehicle Dynamics Control 2.0 at IAA Mobility 2023. The software will provide easier handling and safety of automobiles with control over braking, electric powertrain, and electric steering systems. This will lead to less counter-steering with a shorter braking distance.
• In September 2023, NXP Semiconductors worked with Elektrobit to develop software for next-generation automotive BMS. This will reduce the entry-level cost of BMS development and the use of NXP's high-voltage BMS design.
• In May 2023, BlackBerry Limited showcased its QNX Software Development Platform (SDP) 8.0. It will enable automakers to deliver more powerful software products at lower costs while maintaining the safety, security, and reliability of QNX software.
• In February 2022, Jaguar Land Rover partnered with NVIDIA Corporation to deliver next-generation ADAS and AI-powered services. In 2025, new Jaguar and Land Rover vehicles will be built on the NVIDIA DRIVE SDV platform and provide active safety, automated driving, and driver assistance systems.

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