AUTOMOTIVE SOFTWARE MARKET SIZE AND SHARE ANALYSIS - GROWTH TRENDS AND FORECASTS (2024-2031)

Market Size and Trends

The Automotive Software Market is estimated to be valued at USD 16.08 Bn in 2024 and is expected to reach USD 37.68 Bn by 2031, exhibiting a compound annual growth rate (CAGR) of 12.9% from 2024 to 2031. With the rapid adoption of electronic systems in vehicles for advanced driver-assistance, in-car connectivity and automation, the demand for automotive software is growing significantly.

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Factors such as the rising demand for autonomous and connected vehicles, increasing electronic architectures in modern vehicles, and stringent government regulations regarding vehicle safety and efficiency will boost the demand for automotive software. Additionally, the growing demand for advanced driver-assistance systems and rising demand for smart infotainment systems in vehicles will support the growth of the automotive software market during the forecast period.

Increasing Vehicle Connectivity and Autonomous Features

With advancements in technology, the automotive industry has seen a rapid increase in the development of connected and autonomous vehicle technologies in recent years. Automakers are striving to integrate more digital capabilities and connectivity features into vehicles to enhance the driving experience for consumers. The growing demand for infotainment, onboard diagnostics, over-the-air updates, advanced driver-assistance features, and future fully autonomous vehicles is significantly driving the need for improved and more sophisticated automotive software. Most new vehicles now come equipped with touchscreen interfaces, Bluetooth, navigation systems, wireless app integration, and active safety systems like lane keeping assist and automatic emergency braking which require underlying software solutions.

As 5G networks start rolling out and become more pervasive, it will allow vehicles to take advantage of edge computing capabilities for real-time analytics and remote access. This brings automakers an opportunity to offer advanced features like high-speed internet connectivity, remote diagnostics, predictive maintenance, and over-the-air system updates to both improve efficiency and generate new revenue streams from connected services. Going further, the development of self-driving cars will rely heavily on powerful onboard computers and highly complex software systems to safely control the vehicle's movement through deep learning algorithms trained on vast amounts of road scenario data. Overall, automakers must significantly boost their investments in automotive software to keep up with consumer demand for new connectivity and to facilitate the integration of autonomous driving technologies.

Market Concentration and Competitive Landscape

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Modern vehicles today contain over 100 million lines of code on average and this figure continues to multiply rapidly with each new model year. The rising electronic and software content in automobiles is being driven by the increasing adoption of ADAS, infotainment and electrification technologies. Advanced automated driving features require more robust and customizable software platforms that can be continually updated. New vehicle platforms are also being developed with centralized domain controllers to consolidate software control over formerly standalone electronic control units. Building vehicles with high degrees of software-defined flexibility allows automakers to streamline the development process and more frequently roll out new features and personalization options through remote updates.

Furthermore, the introduction of electric and hybrid powertrains has made vehicles even more dependent on advanced software systems for battery management, power optimization and regenerative braking control.

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Vehicle systems are becoming increasingly complex with the adoption of advanced driver-assistance, connectivity, and electrification technologies. This requires more sophisticated software that is expensive to develop and validate. Additionally, as cars collect more data, stringent cybersecurity and data privacy regulations add to development costs. Companies must also contend with short innovation cycles and pressure to continually enhance features over a vehicle's lifespan. Maintaining software quality during ongoing over-the-air updates presents technical difficulties.

Market Opportunities: Integration of artificial intelligence in vehicles

As software takes a more central role in vehicles, it allows automakers to differentiate their brands and build customer loyalty through continuous feature improvements. The growing automation of driving functions also means vehicle systems will demand more sophisticated software control. The rise of electric vehicles and mobility services further increases the need for innovative software solutions.

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In terms of Vehicle Type, Passenger car contributes the highest share of the automotive software market owing 48.9% in 2024 to continuous demand for enhanced safety, convenience, and comfort features. Passenger vehicles are being integrated with advanced software and connectivity features to provide internet access, navigation assistance, entertainment and remote diagnostics capabilities. Software is playing a vital role in enabling autonomous driving functions and computer vision capabilities through cameras, radars and sensors. Additionally, software powered infotainment and telematics solutions are optimizing the in-vehicle experience for drivers and passengers. Emerging technologies like vehicle-to-vehicle and vehicle-to-infrastructure communication also heavily rely on robust automotive-grade software. Rising consumer expectation for a smarter and personalized driving experience will further fuel innovation in passenger car software in the coming years.

Insights, By Software Layer- Application software leads to optimize vehicle functions and cloud connectivity

In terms of Software Layer, Application software contributes the highest share of the market owing 46.3% in 2024. Growing demand for optimized vehicle control and new-age digital services is propelling the application software segment. Advanced applications are being developed to precisely manage engine, chassis, body and powertrain controls according to dynamic road and driver conditions. Sophisticated software algorithms are delivering seamless transmission, real-time diagnostics and telematics integration. Modern vehicles also leverage cloud connectivity through application software to provide value added services like remote updates, multimedia downloads, emergency alerts and predictive maintenance. Upcoming technologies like augmented reality interfaces and gesture controls will further elevate the role of application software in shaping the future of mobility.

Insights, By Offering- Integrated software solutions optimize total cost of ownership

In terms of Offering, Solutions contributes the highest share of the automotive software market owing 63.5% in 2024. Vehicle manufacturers and component suppliers prefer integrated software solutions over individual services due to optimized total cost of ownership. Standardized software packages offer plug-and-play capabilities for quick vehicle integration and deployment at large production scales. These ready-to-implement solutions encompass complete sets of operating systems, middleware, applications, tools and regular updates backed by contractual technical assistance. They help automakers avoid high development costs while expediting time-to-market for advanced functions. Additionally, subscription-based software solutions are gaining prominence with their ability to facilitate regular remote upgrades and personalized local configurations in connected vehicles.

Regional Insights

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North America has established itself as the undisputed leader in the global automotive software market owing 41.4% in 2024. The large-scale presence of automotive giants such as General Motors, Ford, and Tesla has enabled early mover advantage for the region. American firms have invested heavily in research and development over the years to build strong in-house capabilities in automotive engineering and digital technologies. This allows them to develop cutting-edge software solutions for advanced driver-assistance systems, autonomous driving features, telematics, and other connectivity applications. A strong manufacturing base coupled with rising consumer demand for connected vehicles has cemented North America's dominance.

China has emerged as the fastest growing regional market for automotive software. Riding on the country's status as the largest automotive producer as well as the biggest automobile market globally, China is witnessing massive investments by global tech majors and domestic firms to turbocharge electrification and digitalization of its automotive industry. Original Equipment Manufacturers have ramped up investments in areas such as automated driving, electric vehicle development and smart mobility to gain an edge. Both international and local tech companies are partnering actively with automakers to deploy 5G networks, artificial intelligence and big data analytics solutions tailored for China’s automotive needs. The Chinese government is also providing a conducive policy environment with initiatives to boost indigenous innovation, digital infrastructure and green technologies adoption. With its enormous scale, improving standards of living and focus on new energy vehicles, China looms large as the future growth engine for the global automotive software industry.

Europe, too, is emerging as an important regional market, led by Germany. Automakers in Germany have a strong pedigree in engineering excellence and are investing substantially in digitization to enhance competitive edge. This is creating considerable opportunities for automotive software vendors across technologies ranging from advanced driver-assistance to connectivity, mobility-as-a-service and electric vehicle solutions. European firms are forming strategic alliances to develop software for seamless mobility experiences. With a thrust on green technologies worldwide, Europe's comprehensive EV policies and charging infrastructure build-out are stimulating software investments in areas like battery management, power trains, and fleet management.

Market Report Scope

Key Developments

• In February 2022, TTTech Auto, a company specializing in automotive software, secured a US$ 285 million investment from Audi and APTIV. Aptiv plans to invest US$ 228 million, while Audi aims to increase its existing stake by US$ 57 million.
• In September 2021, Woven Planet Holdings, a subsidiary of Toyota Motor Corp., acquired Renovo Motors to enhance software development for autonomous vehicles
• In July 2021, Volvo is a Swedish multinational manufacturing company known for its production of trucks, buses, construction equipment, marine and industrial engines, and aerospace components revealed its plans to revamp its infotainment and data systems with a new in-house operating system, VolvoCars.OS, which will debut in future cars starting from 2022
• In February 2021, Volkswagen Group is a German multinational automotive manufacturing company headquartered in Wolfsburg, Germany. teamed up with Microsoft is a multinational technology company headquartered in Redmond, to expedite the development of automated driving. The collaboration between Volkswagen Group's Car Software Organisation and Microsoft aims to build an Automated Driving Platform for agile development of automated driving functions. Leveraging Microsoft Azure, the cloud-based platform will streamline development processes to bring automated driving solutions to the group.
• In February 2021, Bosch is a major supplier of automotive components and systems to automotive manufacturers worldwide. partnered with Microsoft to create a software-defined vehicle platform, aiming for smooth integration between cars and the cloud. This collaboration combines automotive and cloud computing know-how to influence the future of vehicle software.

*Definition: "The automotive software market is the industry comprising companies that develop, manufacture, and sell software and applications for vehicles. This includes embedded software for engine and transmission control units, entertainment and navigation software, advanced driver-assistance systems, connected-car services, and cybersecurity solutions that help automakers enhance the functionality, entertainment options, safety, and overall driving experience in modern automobiles."

Market Segmentation

• Vehicle Type Insights (Revenue, USD BN, 2019 - 2031)
  • Passenger car
  • LCV
  • HCV
•  Software Layer Insights (Revenue, USD BN, 2019 - 2031)
  • Operating System
  • Middleware
  • Application software
•  EV Application Insights (Revenue, USD BN, 2019 - 2031)
  • Charging Management
  • Battery Management
  • V2G
•  Offering Insights (Revenue, USD BN, 2019 - 2031)
  • Solutions
  • Services
•  Application Insights (Revenue, USD BN, 2019 - 2031)
  • ADAS & Safety Systems
  • Body Control & Comfort System
  • Powertrain System
  • Infotainment System
  • Communication System
  • Vehicle Management & Telematics
  • Connected Services
  • Autonomous Driving
  • HMI Application
  • Biometrics
  • Remote Monitoring
  • V2X System
•  Organization Size Insights (Revenue, USD BN, 2019 - 2031)
  • Large Scale Organizations
  • Medium Scale Organization
  • Small Scale Organization
• Regional Insights (Revenue, USD BN, 2019 - 2031)
  • North America
    • U.S.
    • Canada
  • Latin America
    • Brazil
    • Argentina
    • Mexico
    • Rest of Latin America
  • Europe
    • Germany
    • U.K.
    • France
    • Italy
    • Russia
    • Rest of Europe
  • Asia Pacific
    • China
    • India
    • Japan
    • Australia
    • South Korea
    • ASEAN
    • Rest of Asia Pacific
  • Middle East & Africa
    • GCC Countries
    • South Africa
    • Rest of Middle East & Africa
• Key Players
  • ATEGO SYSTEMS INC.
  • Autonet
  • Blackberry
  • Wind River
  • Microsoft
  • ACCESS, Broadcom
  • Google
  • Green Hills Software
  • MontaVista Software
  • Mentor Graphics
  • Airbiquity
  • Texas Instruments
  • Adobe Systems
  • PTC Inc.
  • NXP Semiconductors
  • Renesas Electronics
  • Dassault Systems
  • Intellias Ltd.