Automotive Software Market

Automotive Software Market Outlook (2023 to 2033)

The global automotive software market is forecasted to surge ahead at a CAGR of 12.5% and reach a valuation of US$ 65 billion by the end of 2033, up from US$ 20 billion in 2023.

Automotive software consists of a series of programmable data instructions in the vehicle that aids in the improvement of safety, performance, and driving experience. It makes use of advanced driver assistance systems (ADAS) to improve telematics, body control, convenience, and communication.

Automotive software is also used to arrange appointments, take reservations, and examine automobiles digitally. The program is currently commercially available in a variety of product types, including application software, operating systems, and middleware.

In the past few years, the automotive industry has seen significant advancements in self-driving car technology, with advanced driver assistance systems (ADAS) being one of the critical parts of the technology.

Furthermore, in response to increasing demand for sophisticated safety features like autonomous emergency braking systems, adaptive cruise control, and increased government regulations to reduce road accidents, big automotive OEMs are incorporating ADAS functionalities into their next-generation vehicles.

With capabilities such as emergency braking, lane monitoring, stability controls, and others that are essentially software-driven, ADAS technologies have considerably decreased the complexities of driving.

As a result of the introduction of ADAS features in next-generation vehicles, several Tier 1 firms and OEMs are forming alliances with software development suppliers to create advanced ADAS software. As a consequence, the global market is experiencing significant growth.

• For example, in January 2020, Hella, a lighting and electronics company, and Oculii, a start-up based in the United States, teamed up to create high-performance software for ADAS and autonomous vehicles (AVs).

As predictive capabilities become more prevalent in vehicles and the driving experience gets more personalized, AI and 5G will play a crucial part in the future of the automotive industry. Automakers are increasingly employing data-driven algorithms to automate vehicle settings such as infotainment systems and application preferences. Furthermore, 5G is better suited for vital communications for increased vehicle-to-vehicle (V2V) connectivity, safer driving, and connected mobility solutions.

Working with automotive software generates massive amounts of data, which has contributed to the rise of AI in the automotive sector. Speech and gesture recognition, eye tracking, upgraded HMI, driver monitoring, virtual assistance, radar-based detection units, and engine control units all use artificial intelligence in automotive software.

Deep learning is expected to expand rapidly in the automotive industry compared to other technologies, propelling the growth of the automotive software market.

Report Attributes	Details
Automotive Software Market Size in 2023	US$ 20 Billion
Projected Market Value (2033)	US$ 65 Billion
Global Market Growth Rate (2023 to 2033)	12.5% CAGR
Asia Pacific Market Share (2022)	36.7%
Leading Application Segment	Safety Systems
Key Companies Profiled	Apple, Inc Airbiquity, Inc Accenture PLC Amazon Web Services, Inc Adobe Inc Akamai Technologies, Inc Access Co., Ltd ANSYS, Inc

Which Factor is Fueling the Sales Growth of Automotive Software?

“Rapidly Increasing Number of Connected Cars”

The burgeoning number of connected cars has provided attractive opportunities for ecosystem participants. Some non-automotive companies have joined the competition of autonomous driving and connected cars to seize financial prospects. Vehicles are no more entirely hardware-centered moving machines. They now represent approximately 30% of electronic material, with this number predicted to climb to over 50% in the next decades.

The bulk of electronic material for sophisticated automotive applications like engine management systems, telematics, and ADAS will be made up of consolidated ECUs, domain controllers, AI, and HMI. These apps must be developed with several lines of code to function effectively. The intricacy of these applications is rising as cars become more technologically advanced.

Consequently, systems must be constructed with extra codes, raising the demand for embedded software. Thus, the expanding number of connected vehicles is promoting the use of automotive software.

What Can Negatively Impact Market Expansion?

“Dearth of Connected Infrastructure in Most Regions”

The costly infrastructure needed for 5G and wireless connectivity can have a negative impact on worldwide market growth. The required software interaction platforms, including data analytics, IoT, and the cloud, can cost a large amount of money to develop. Moreover, to include new content, ADAS systems and connected cars require quick, flexible, and accessible software updating mechanisms.

Furthermore, the challenge has grown as the updates need fast internet access, which emerging economies are still striving to develop.

Country-wise Insights

Why are South Korea and Japan Witnessing High Demand for Automotive Software?

“High Manufacturing of Vehicles in These Countries”

Asia Pacific is leading the global market for automotive software. Asia Pacific held 36.7% of the worldwide market in 2022. The region's key automotive manufacturers, as well as software providers and system integrators, are committed to creating and inventing innovative software solutions to support dependable, safe, and performance-oriented automotive applications.

South Korea and Japan are witnessing a rising demand for automotive software due to the increasing manufacturing of vehicles in these countries.

• For example, in terms of vehicle output, South Korea's automobile sector was the fourth most prominent manufacturer of passenger cars in 2021, surpassing Germany.

Why is the United States Making a Splash in the North American Market?

“Increasing Number of Self-driving Cars across the Country”

North America is experiencing growth in the global market due to the presence of prominent market players, as well as strong research and development initiatives.

The United States is a dominant market in North America. The country has been a pioneer in the field of autonomous vehicles due to aspects such as the presence of renowned automotive firms in the country and being the home of the world's major technology giants such as Microsoft, Google, and others.

Self-driving cars have been tested and used in Texas, California, Washington, Arizona, Michigan, and other places in the United States. In the past two years, the country has dramatically increased the number of releases of autonomous car models.

• General Motors Co. announced investments in electric and self-driving vehicles in June 2021, with a commitment to invest US$ 35 billion by 2025.

What Makes Germany and the United Kingdom Major Markets in Europe?

“Strong Usage of Software-based Technologies”

Europe is contributing significantly to the worldwide market. Germany and the United Kingdom are major markets for automotive software in Europe. One of the factors fueling the market growth in these countries is the growing usage of software-based technologies such as telematics, in-vehicle infotainment, and ADAS.

The booming automobile industry, technological breakthroughs, and government laws aimed at improving the driving experience are all adding to the market expansion in Germany and the United Kingdom.

• For example, the Society of Motor Manufacturers and Traders (SMMT) expects that by 2025, over 95% of all automobiles on British roads will be connected.

Government regulations concerning driver safety and security compel manufacturers to provide in-vehicle infotainment with hands-free connected calls, fueling the market's growth.

Category-wise Insights

Why is Automotive Software Extensively Employed for Safety & Security Purposes?

“Growing Customers' Interest in Safety Applications”

Due to the growing use of a few ADAS technologies as standard features, even in mid-size vehicles, the use of automotive software for safety & security purposes is projected to grow significantly during the projection period. Increasing customers' interest in safety applications that assist drivers in staying safe and reducing accidents is expected to generate demand for advanced driver assistance systems (ADAS).

The Federal Motor Vehicle Safety Standards (FMVSS) is a collection of US rules describing all automobiles' safety requirements. Whereas the EU's regulations are primarily based on UN research and recommendations, the FMVSS was developed in collaboration with US regulatory agencies.

The United States and the European Union are developing rules to ensure that all automobiles have emergency braking and forward-collision alert systems. For meeting regulatory criteria, FWVSS requires three domains of testing: collision avoidance, crashworthiness, and post-crash survivability.

• For example, the Kia Carnival includes a 'safe exit warning' and 'safe exit assist' systems that employ sensors close to the tail lights to identify possible impending dangers and avoid crashes when the car is traveling less than 3km/h.

Such vehicle safety and security feature launches are projected to fuel demand for dependable software solutions, bolstering the market growth.

Competitive Landscape

Key players in the automotive software market are pursuing tactics such as collaborations, investments, new developments, R&D activities, and mergers to grow and strengthen their global footprint. Furthermore, numerous start-ups are raising funds to work on innovative solutions and gain market share.

• Eatron, a start-up based in the United States that creates 'intelligent automotive software', received a US$ 11 million Series A funding round spearheaded by the United Kingdom's MMC Ventures.
• NXP Semiconductors introduced the S32G GoldVIP in February 2022 to meet software-defined vehicles' real-time and application development difficulties. This vehicle integration platform provides a variety of value propositions for S32G processor evaluation, software development, and rapid prototyping.
• APTIV and Audi invested US$ 285 million in the automotive software business TTTech Auto in February 2022. Aptiv invested US$ 228 million in this fundraiser, while Audi plans to boost its existing investment by US$ 57 million.
• Woven Planet Holdings, a division of Toyota Motor Corp., absorbed Renovo Motors in September 2021 to improve software development for driverless vehicles.
• Volvo unveiled plans in July 2021 to revamp its infotainment and data systems with a new in-house built operating system, VolvoCars.OS that will be installed in future cars.

Key Segments of Automotive Software Industry Research

• By Product :

  • Application Software
  • Middleware
  • Operating Systems

• By Application :

  • Safety Systems
  • Infotainment & Telematics
  • Powertrain
  • Others

• By Vehicle Type :

  • Passenger Cars
  • Commercial Vehicles
  • Electric Vehicles

• By Region :

  • North America
  • Latin America
  • Europe
  • Asia Pacific & China
  • Middle East & Africa