The Future of the Automotive Industry (2023)

The past 20 years have generally been good for carmakers, but the next 20 years will likely be very different as software begins to control and shape a vehicle’s experience and development more visibly. A key element of software-defined vehicles (SDVs) is the ability for users to fine-tune various levels of personalization, such as comfort, convenience, safety, and performance. Consequently, our future cars will be able to adapt and improve post-sale, retaining or even increasing in value over time, as opposed to remaining a traditionally depreciating hardware asset.

Every automotive original equipment manufacturer (OEM) is somewhere on its SDV journey with interesting offerings found in digital cockpits, driver assist, and electric vehicle (EV) features. Each is running a major cultural and organizational transformation to become a fast-paced technology company that can challenge the conventions of a century-plus-old industry and expand to unfamiliar business models.

In particular, the automotive product-development ecosystem (research and development [R&D], advanced technologies, IT, and engineering) must pivot in unison to a software-led mindset. It must excel at building software-driven features that redefine the brand and not allow hardware to limit the experience. Ultimately, the goal is to create a vehicle with the capacity for continuous upgradability.

The Future of the Automotive Industry (1)

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On-the-ground incumbent carmakers are “climbing a mountain” as they invest in a long-haul software-driven transformation.1Most notably, revenue is hardware-based; so product definition, R&D, manufacturing, and supply chain still live in a world of parts and components. Incumbents are also saddled with legacy organizational structures that make scaling decisions across multiple brands costly and complex. Finally, for safety reasons, the automotive sector has an entrenched mindset that shipping software post-production is in direct opposition to a stable product.

Nevertheless, car brands have put into motion ambitions and strategies that emphasize a need to dominate and gain control over their SDV destiny. For example, some automakers have elected to create separate software R&D entities to accelerate the transition. Others are in the midst of digital transformations that span manufacturing to engineering and direct-to-consumer sales models. Each journey will differ depending on collaboration with existing suppliers and an open marketplace ecosystem, encompassing software, silicon, and a diverse range of technology partnerships.

While all OEMs have outlined their desired positions in the automotive software landscape by 2030, current economic conditions have affected most of the action plans. There is also genuine uncertainty concerning the willingness of different customer segments to pay for one-time or recurring software features. That being said, regardless of the scope or pace of the transformation, becoming a prominent player in the SDV arena is recognized as a prerequisite for achieving competitive success. One should also not discount the fact that vehicle self-awareness is about not only revenue generation but also self-healing, as over-the-air (OTA) updates also target preventive fixes significantly reducing cost of quality.

We have seen four priorities emerge from our conversations with OEMs, tier 1 suppliers, and technology companies as they work to not only get ready for a significant SDV push but also compete with a new class of product—one that must conform to unique schedule, scope, and resource constraints.

The Future of the Automotive Industry (2)

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Software-led product development mindset

Simultaneously achieving the adaptability of a software or technology startup, combined with the opportunities and influence of a global OEM, and delivering robust software capabilities, represent the complexities faced by incumbents in the automotive industry. While there won’t be a single path to achieving these objectives, we have identified a common set of success factors for OEMs, tier 1 suppliers, and technology companies:

  • Implement a business model where software becomes the primary source of cost and value; transform the traditional hardware-based approach; and redefine sales strategies, dealer interactions, and direct-to-consumer pricing.
  • Initiate product design with a focus on features as the benchmark, managing software and hardware cohesively to enhance the overall car experience rather than financing the investment by vehicle model preference.
  • Adopt life cycle costing for software to shift system complexity from monolithic applications to micro services, enriching the automotive experience and including more hardware capacity upfront than the minimum to run the software at vehicle launch.
  • Transition from a software R&D startup to production-ready, adhering to the rigorous “V-model,” automotive regulations and safety requirements while gradually integrating cloud-based V-model components.
  • Establish and manage robust alpha and beta test capabilities and communities in compliance with regulatory and safety standards, enabling customers to participate in field beta testing to minimize surprises in the initial version of feature releases.
  • Center development and release processes on features closely linked with reliable OTA update campaigns, minimizing the need for in-person servicing and ensuring clear product-led ownership and governance of feature definition; features are not only driving experiences but also the “health” of the vehicle, regardless of life cycle states (design, manufacturing, in-field or in-service).
  • Develop software that is decoupled from dependencies as much as possible from the exact versions of other hardware, configurations, calibrations, and software in the system.
  • Develop the ability to deploy software efficiently, whether at the end of the production line, at charging stations or service departments, or primarily through OTA updates, ensuring scalability across different brands and product variants.

Quality needs to guide the ongoing transformation

In the context of an automotive OEM or tier 1 supplier, customers have high expectations regarding the availability, predictability, and reliability of functions and services. Quality management and software bug resolution become even more crucial due to the safety-critical mandate that must be upheld. Utilizing virtual environments for verification and validation, along with phase-specific software key performance indicators, can aid in preventing recalls, enhancing code coverage, and minimizing the blast radius. Other quality-related factors contributing to success include the following:

  • Design and deploy advanced hardware and software systems emphasizing fault tolerance and resilience.
  • Utilize high-quality components, incorporate redundancy when needed, and apply rigorous testing and validation processes to ensure consistent performance under varying conditions.
  • Implement quality management to accommodate new software platforms and legacy hardware.
  • Cover the entire product life cycle in quality activities, from concept and development to product enhancement, customer satisfaction monitoring, external standards and regulations shaping, supplier quality evaluations, embedded quality, and launch stabilization.
  • Utilize new low-latency input channels as a proxy for the voice of the customer, incorporating complaints, vehicle data, and user data monitoring.
  • Establish efficient systems engineering management to address hardware and software integration end to end (from requirements to release and from the car to the cloud), supported by comprehensive project-management tools (digital thread, process/data models, etc.).
  • Employ predictive analytics, machine learning, and real-time data to proactively identify potential issues before they arise, recognizing patterns and trends that could lead to system failures.
  • Leverage compute power to provide ability for vehicle to self-test, self-predict, and self-fix issues along the life cycle. Zero-forward quality becomes the standard versus just an aspiration.
  • Provide dedicated and responsive customer support, such as in-vehicle assistance, remote diagnostics, and a network of skilled service technicians.
  • Continuously monitor and analyze customer feedback and usage data to pinpoint areas for improvement. Ensure ongoing customer satisfaction by regularly updating software and refining existing features and services.

Platform simplification and evolution to software

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The major difference between hardware and software is that while hardware generally requires minimal maintenance, software often requires ongoing updates and fixes. So, an upgraded vehicle’s electrical and electronic architecture will be the foundation of an SDV that allows for feature upgradability and reduced hardware component count (e.g., from 60–150 ECUs2 in a lower-to-luxury-tier car to a few high-performance domain controllers in an SDV). Some of the necessary prerequisites for a scalable car software platform and operating system include the following:

  • Establish one uniform software architecture for the entire vehicle range, making the management and maintenance of vehicle software more scalable (achievable in modules, updates/maintainability, and decoupling hardware).
  • Promote a multi-company system-on-a-chip (SoC) strategy not tied to a value chain, with the capability for the OEM to design, code, and use the compute infrastructure (e.g., major updates beyond product launch).
  • Implement a progressive and continuous software development workflow, incorporating insights and signing up beta customers post-SOP (e.g., feature flags, OTA), and going from “code to road” in seconds, a single day, or four to five times per day.
  • Evolve vehicle electrics and electronics (E/E) architectures to allow software teams to better utilize high-performance hardware with appropriate interfaces and compatibility across multiple hardware generations.
  • Rightsize ADAS/AD development activities with prioritized and differentiated focus areas and use cases, partnering with silicon companies, evaluating the latest SoCs, and teaming with the ecosystem to share development costs and accelerate progress.
  • Establish a stable software architecture, including core software, runtime environment, drivers, etc., ensuring downward compatibility across hardware generations while maintaining performance.
  • Transition from basic telemetry and data collection to advanced big data loop architectures, capable of producing training data sets and enhancing embedded software test suites.
  • Incorporate real-time operational design domain (ODD) considerations (weather, carbon footprint, terrain, load/duty) into vehicle design, manufacturing, and in-field performance with ability to control vehicle behavior/features based on real-life scenarios. For example, vehicle prevents features based on ODD input—why should one be able to open a sunroof when it’s raining?

Controlled pivot to cloud-based environments—vehicle onboard and offboard

One of the key advantages of SDVs is the accelerated transformation of the automotive product development workflow to incorporate the efficiency benefits of a cloud native from vehicle onboard system to offboard and cloud. This involves establishing a consistent platform for in-vehicle operating system (OS), containers, DevOps, and micro services to promote a “build once and deploy anywhere” approach. However, this can be easier said than done, due to the necessity for engineering platforms (e.g., APICE, requirements and systems engineering, product life cycle management, safety code, testing) that meet automotive-grade standards. Some critical elements of a cloud-centric approach for both vehicle onboard and offboard include the following:

  • Establish accurate R&D planning and development schedules (across production, supply chain management, and R&D) for fully manufactured vehicles that are predominantly made up of software capabilities.
  • Enhance developer productivity by using cloud platforms to speed up build systems and shorten development cycles, including collaboration with suppliers in different ways.
  • Utilize hardware-free prototyping through emulation and software-in-the-loop testing and simulation to achieve higher code quality before physical tests.
  • Utilize generic hardware in the cloud as a proxy for first module samples, as the ability of cloud hardware to more closely mimic vehicle compute rapidly improves.
  • Move to a completely virtual development environment in the cloud where developers can deploy anywhere on multiple operating systems (QNX, Android, Wind River, Automotive Grade Linux, RedHat, etc.) with automated build toolchains.
  • Provide on-demand visibility of vehicle configuration and change history by tracking genealogy data during the product development and manufacturing life cycle. Make the vehicle master for what is installed inside it in any mismatch between car and cloud versioning.
  • Eliminate downtime during the build or post-build phase due to incompatible software versions, minimizing the effort required to diagnose and resolve software/hardware issues due to frequent software version changes.
  • Integrate cybersecurity and safety criticality into a streamlined homologation workflow and implement automotive-grade development pipelines that balance risk, speed, and adherence to regulations (e.g., SOTIF, ISO 26262).
  • Increase the frequency and expand the coverage in larger OTA upgrade campaigns, improving proficiency over time and emphasizing stability.

Becoming a league player in SDV

Over the next 20 years, the factors that distinguish winners and leaders from laggards in the automotive industry will largely depend on the SDV capabilities of their product portfolio and their ability to transition product development to a customer-relevant and software-driven mindset. The cost and number of cars produced used to be key factors of commercial success, but now it will be the ability to create a scalable organization that follows a similar growth pattern to a technology company.

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As software becomes the primary factor in a vehicle’s value proposition and drives new business models, there is a need for streamlined and agile end-to-end automotive product development workflow. OEMs should design their organizations with the understanding that the ecosystem is ever-changing and there will be a continuous evolution of high-performance computing and more open software platforms.


1 Nathan Eddy “Continental sees software as Everest of challenges,” Automotive News, March 11, 2023.
2 Dr. Harald Proff and Philipp Wolf, “Software is transforming the automotive world,” Deloitte Insights, June 18, 2020; Dr. Harald Proff, Thomas Pottebaum, and Philipp Wolf, Deloitte, 2019; Christoph Hammerschmidt, “Number of automotive ECUs continues to rise,eeNews Europe, May 15, 2019.


Walid Negm
Managing Director
Deloitte Consulting LLP
Philipp Wolf
Senior Manager
Deloitte Consulting LLP
Jim Heaton
Specialist Leader
Deloitte Consulting LLP
Stavros Stefanis
Deloitte Consulting LLP


The Future of the Automotive Industry? ›

The automotive industry is currently facing a major supply chain shortage, that is set to continue throughout 2023. This shortage is being caused by a combination of different factors, including increased demand for vehicles, disruptions in global trade, and supply chain bottlenecks.

What is the future of the automotive industry in 2023? ›

Global car sales in 2023 are forecast to top 69 million, fuelled by greater penetration in emerging markets, growing adoption of electric vehicles and the reopening of China following its relaxation of Covid-19 restrictions.

What are the future challenges for the automotive industry? ›

Logistics and supply problems, energy cost overruns, skilled labor problems, a complicated economic and political scenario, a more aware and demanding consumer… among others, are some of the problems that car manufacturers are facing today and in the near future.

Which 4 innovation fields are defining the future of the car industry? ›

Digitization, increasing automation, and new business models have revolutionized other industries, and automotive will be no exception. These forces are giving rise to four disruptive technology-driven trends in the automotive sector: diverse mobility, autonomous driving, electrification, and connectivity.

Will there be a car recession in 2023? ›

In the U.S., the Manheim Used Vehicle Value Index — which measures the prices dealerships pay for used cars at auctions — hit a high of 257.7 in January 2022 and has since fallen to 222.5 in January 2023. Overall, J.P. Morgan Research predicts used car prices will decline by roughly 10% in 2023.

What will happen to cars by 2050? ›

By 2050, there will be about 3 billion light-duty vehicles on the road worldwide, up from 1 billion now. At least half of them will be powered by internal combustion engines (ICE), using petroleum-based fuels.

What are the 4 trends in the automotive industry? ›

For the automotive sector, these forces are giving rise to four disruptive technology-driven trends: diverse mobility, autonomous driving, electrification, and connectivity.

Will the automotive industry bounce back? ›

Overall Vehicle Sales Will Inch Closer to a Rebound in 2023

ABI Research forecasts global vehicle sales growth of 5.1% in 2023, and 3.3% in 2024. Moreover, automakers can expect sales to return to the 90 million+ highwater mark in 2025.

Why is the car industry struggling? ›

The lack of sufficient semiconductors caused widespread production cuts around the globe. Worldwide, carmakers are estimated to cut a total of 19.6 million vehicles out of their production schedules between 2021 and 2023.

What technology will cars have in the future? ›

Today, drivers are greeted with “smart” future car technology like sophisticated infotainment systems, dash controls, advanced stereo systems, and virtual assistants. Newer vehicles can even read text messages, control a driver's speed, and charge a tablet — all at once.

Where is the auto industry headed? ›

Production is not back to normal, but it has started to recover and has been improving quickly over the last several months.” Smoke noted that we started 2023 with about 800,000 more vehicles in new vehicle inventory than we had a year ag. Most of that improvement occurred in the final four months of last year.

What are future changes in automobile technology? ›

Future changes in automobile technology are likely to include: Increased sophistication of controls and instruments, many of which will contribute to safety. All of these choices are correct. Improved safety through engineering research and development (both vehicle and road)

Should I buy a car now or wait until 2023? ›

Americans planning to shop for a new car in 2023 might find slightly better prices than during the past two years, though auto industry analysts say it is likely better to wait until the fall. Since mid-2021, car buyers have been frustrated by rising prices, skimpy selection and long waits for deliveries.

Is 2023 a good year to buy a car? ›

According to industry analysts from Cox Automotive and J.D. Power, some automotive market conditions are likely to improve in 2023, but perhaps not enough to trigger radical change. "We certainly do expect the market to get better than it's been," says Tyson Jominy, vice president of data and analytics at J.D. Power.

Will car prices go down if there is a recession? ›

Do Car Prices Go Down In A Recession? Car prices typically go down when supply exceeds demand. However, unlike in past recessions, some automakers are making permanent changes to how they do business.

Can you still drive gas cars after 2035? ›

But owners of vehicles with internal combustion engines will still be permitted to operate or resell them after 2035. With the average lifespan of a car in the U.S. pegged at about 12 years, there will be a need for gasoline for decades to come. Still, that demand will decline dramatically.

Will gas cars really go away? ›

Last month, California regulators passed rules banning the sale of new gas-powered cars by 2035, a move hailed as a significant victory in the fight against climate change.

How long will we be able to drive gas cars? ›

California will ban sales of new gas-powered cars by 2035, but the conversion to battery-powered vehicles poses numerous unresolved issues.

What are the three C's in the automotive industry? ›

Most car dealers and fixed operations managers are familiar with the three 'C's of repair orders: condition, cause, and correction, which are necessary to complete an order correctly.

What are the big 3 car industries? ›

The Big Three in the automotive industry is a reference to the three largest car manufacturers in the United States: General Motors Company (GM), Stellantis (STLA), formerly known as Fiat Chrysler, and Ford Motor Company (F).

What are the mega trends in the automotive industry? ›

Electromobility, autonomous and connected driving, as well as sustainability are influencing market developments in the automotive industry and are considered to be the current megatrends.

Will cars ever be cheap again? ›

Between 2021 and 2022, car prices reached an all-time high because of factors related to the COVID-19 pandemic. Fortunately, 2023 is going to be the year that prices finally drop.

Will car manufacturers ever catch up? ›

Automotive production is likely to remain below pre-pandemic levels through 2024, Jewell said. Automakers cut back on semiconductor orders severely at the beginning of the Covid-19 pandemic in early 2020. They were fearful of being stuck with excess inventories of cars if demand fell significantly due to the pandemic.

Is the auto shortage getting better? ›

The Auto Chip Shortage Remains, But It May Be Improving

However, if Fiorani's estimate holds true, it would mark a significant improvement for the industry. More than 10.5 million vehicles were cut from production in 2021, according to Auto News.

Why is the car industry so bad right now? ›

New car factories, anticipating a massive drop in demand as many Americans reduced their driving, halted or slowed production for months. Demand for new cars recovered as the economy recovered and government programs injected new money into it. But a global microchip shortage kept production low.

Why 2023 could be another difficult year for the auto industry? ›

In a nutshell, automakers face a serious challenge in 2023: they need to overcome rising costs and persistent supply chain shortages, but they can't boost prices to keep their profit margins intact.

Why are people not buying cars anymore? ›

Career years lost early on are taking their toll now, meaning lower pay than previous generations at the same age. Given that vehicles are a significant expense, many millennials have decided not to bother. They'd rather give up personal transportation in exchange for more vacations, gadgets, and time off work.

What will happen to fuel cars in the future? ›

Background of Phasing out Gasoline Cars

By 2035, automakers must reduce CO2 emissions by 100% on all new cars they sell. This will make selling new cars that run on fossil fuels impossible in the 27-country bloc. It also says that CO2 emissions from new cars sold after 2030 must be 55 percent lower than in 2021.

Will cars fly in the future? ›

The gas engine that goes with it is powered by premium gasoline. Aska debuted its first flying car prototype in 2019 and started taking preorders in 2021 with an expected 2026 ship date for the first aircraft. Flying cars sound exciting, but the engineering and regulatory challenges are formidable.

Who dominates the automotive industry? ›

General Motors, Ford, and Toyota are the leading automotive manufacturers based on market share in the United States.

Is auto industry slowing down? ›

Auto sales will slowly bounce back.

Even with that increase, though, sales are still likely to remain slightly below 2021 levels, according to AutoPacific's estimates.

When did the US auto industry collapse? ›

In late 2008, the combination of an historic recession and financial crisis pushed the American auto industry to the brink of collapse. Access to credit for car loans dried up and auto sales plunged 40 percent. Auto manufacturers and suppliers dramatically curtailed production.

What is the future of car engines? ›

In 2021, the worldwide internal combustion engine (ICE) market was approximately worth USD 58,514.15 billion and is predicted to reach USD 93,615.18 billion by 2029, growing at a CAGR of 6.05% between 2022 and 2029 showing tremendous growth.

Are electric cars the future? ›

According to Protocol, the ratio of electric cars to gas cars will gradually increase too: By 2025, electric vehicle sales could comprise up to 20% of new car sales. By 2030, electric vehicle sales could reach 40% of new car sales. By 2040, electric vehicle sales could account for nearly all new car sales.

What are the challenges of automotive industry in 2023? ›

However, in 2023, the industry will likely face a number of challenges that will affect its performance and growth prospects.
  • Energy crisis. ...
  • Economic slowdown. ...
  • Supply chain issues. ...
  • Electric Vehicles Market Expected To Grow.
Jan 27, 2023

What are the threats to the automobile industry? ›

Threats. Rising competition: Presence of a large number of players in the automobile industry results in intense competition and companies eating into other's share, leaving little scope for new players. Sluggish economy: Macroeconomic uncertainty, recession, unemployment, etc.

What challenges do auto mechanics face? ›

  • SPEED UP! We all know the classic phrase time is money. ...
  • SPEED UP – AND PERFORM 100% It is not enough just to work faster. ...
  • BE READY TO FACE THE FUTURE. In recent years, vehicles have become increasingly complex. ...
Jan 9, 2019

What is the future of the luxury automotive industry? ›

The luxury and ultra-luxury BEV market will likely increase over the next 10 years, with a CAGR of about 35%, almost 10 times the CAGR expected for non-BEV. Driving future growth is the rising preferences of customers, electrification technology advancements, and favorable policies.

What is disrupting the automotive industry? ›

New disruptive technology is evolving and impacting the automotive and transportation industry. Automotive innovations are driving the logistics and transportation industry into a new era filled with autonomous vehicles and electric vehicles. The pandemic has disrupted how people drive and buy their vehicles.

What are the top 5 most common automobile problems? ›

The Six Most Frequent Car Problems You Could Have
  1. A Bad Battery. ...
  2. Ignition coils and spark plugs. ...
  3. Fuel System Issues. ...
  4. Change your motor oil regularly. ...
  5. Tire Troubles. ...
  6. Exhaust system problems.
Feb 14, 2019

What are 3 negative effects of the automobile? ›

cars are a major contributor to air pollution producing significant amounts of nitrogen oxides, carbon monoxide, and particulate matter. 80-90% of cars' environmental impact comes from fuel consumption and emissions of air pollution and greenhouse gases.

What does the future of mechanics look like? ›

What happens to jobs for auto mechanics? In the short term, not much is happening to these jobs. The Bureau of Labor Statistics forecasts "little or no change" from 2021 to 2031 for automotive service technicians.

What is the hardest job for a mechanic? ›

The four most difficult auto repairs (arguably)
  • #1: Spark plugs. When you think of spark plugs, you probably don't think of a tough repair. ...
  • #2: Clutch. ...
  • #3: Transmission. ...
  • #4: Engine swap.
Aug 20, 2021

What is the hardest thing a mechanic can do? ›

What Is The Hardest Thing To Fix On A Car?
  • Clutch. As a “wear and tear” part in a vehicle, the clutch may need to be replaced as often as every 30,000 km, depending on your handling. ...
  • Spark Plugs. ...
  • Transmission. ...
  • Engine Replacement. ...
  • Repairing Or Recharging An Air Conditioner. ...
  • Body Work. ...
  • Straightening A Frame.


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