Software-defined vehicles change the value chain

Why it matters

Vehicles are increasingly defined by software that can be updated over the air, with centralised computing replacing many separate control units. This changes how carmakers develop vehicles, work with suppliers and earn revenue after sale.

The shift affects organisation as much as technology. Carmakers need software release processes, cybersecurity management and long-term support for vehicles in the field, while suppliers move towards software and integration roles.

What's changing

• Centralised electrical architectures reduce the number of electronic control units.
• Over-the-air updates allow features and fixes after delivery.
• Carmakers are building in-house software capabilities and new supplier partnerships.

How leaders are responding

• Separating hardware and software development cycles.
• Investing in software talent, tooling and platform teams.
• Testing paid features and subscriptions carefully against customer expectations.

What good looks like

• A central vehicle architecture that can be updated over the air
• Software teams organised around features customers pay for
• Clear revenue models for features after the point of sale

What to watch

• Consolidation of vehicle operating systems and middleware.
• Over-the-air update rules and type-approval practice.
• New partnerships between carmakers and technology companies.

Where to start