Driving the Future: 10 Automotive Industry Trends and Predictions
The automotive industry stands at a pivotal moment, experiencing a wave of innovation unlike anything seen since the invention of the motorcar. Electrification, autonomous driving technologies, artificial intelligence (AI), the Internet of Things (IoT), machine learning, and sustainability are converging to reshape the landscape. The modern vehicle is rapidly evolving into a sophisticated ecosystem, moving from a mode of transportation to a connected device and a hub of technological advancements.
Automakers are now producing electric, software-defined vehicles in highly automated, cloud-connected smart factories. This transformation is driven by customer demand, governmental regulations, and the need to meet ever-changing consumer expectations.
Here’s a look at the key trends and their impact on the automotive industry, providing a compass for navigating this exciting new era:
Trend 1: Electrification of the Automotive Industry
Electrification continues to gain momentum, driven by customer demand and governmental mandates encouraging the production of fully electric vehicles (EVs). Automakers are heavily investing in EV development to align with the growing interest in environmentally friendly mobility solutions and to comply with environmental regulations.
While the growth in EV demand slowed in 2023 due to high interest rates and increased EV prices, the market experienced a rebound in 2024. According to Kelley Blue Book, nearly 600,000 EVs were sold in the U.S. during the first half of 2024, representing a 7.3% increase over the same period in 2023. Globally, Rho Motion reports 7 million EVs sold in the first half of 2024, including both battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs), marking a 20% increase compared to the first half of 2023. This includes 4.1 million EVs sold in China, representing a 30% year-over-year increase.
EV sales are expected to continue their upward trajectory, thanks to consumer demand for sustainable transportation and to mandates for phasing out internal combustion engine (ICE) passenger car sales between 2030 and 2050 across more than 50 countries and a few U.S. states. Moreover, over 140 countries have set targets for net-zero emissions by 2050. The International Energy Agency (IEA) estimates that EVs will need to account for 50% of all passenger car sales by 2030 to achieve global net-zero emissions by 2050. BloombergNEF’s Electric Vehicle Outlook 2024 report predicts EVs will reach 45% of global passenger vehicle sales by 2030.
Improved battery efficiency and a growing charging infrastructure are boosting EV adoption. Battery costs are decreasing, with manufacturers like CATL and BYD on pace to decrease prices by as much as 50% by the end of 2024. These falling costs make EVs more price-competitive with ICE vehicles and also make increased EV range more cost-effective. Many original equipment manufacturers (OEMs), including Chevrolet, Hyundai, Jaguar, Kia, Nissan, and Tesla, are offering EV models that provide ranges of 200–250 miles or more.
Trend 2: Increasing Role of Software in Vehicles
Today’s modern vehicles are increasingly software-defined vehicles (SDVs). This means their functions, features, and performance are managed by integrated cloud platforms, end-user apps, and system-on-a-chip (SoC) computing hardware. SDVs are essentially “computers on wheels,” where software determines many aspects of the vehicle’s operation, including driver-assistance features, safety features, and infotainment systems.
SDVs can be updated through over-the-air software updates, similar to a smartphone updating its operating system. Automakers are decoupling vehicle hardware and software functions to ensure they work together seamlessly. There are several technological layers to SDVs, including major software systems that handle in-vehicle infotainment (IVI) and advanced driver-assistance systems (ADAS) which support aspects of autonomous driving.
Different automakers have varying strategies for the development of SDV systems and their related hardware. Tesla, for instance, uses a vertical approach, developing much of its technology in-house. Other original equipment manufacturers often adopt a horizontal approach, partnering with providers for essential SDV components such as cloud platforms (Google Cloud, AWS, Azure), end-user app systems (Android, Amazon, ThunderSoft), car operating systems (Android Auto, Apple CarPlay, Car Penguin), the user interface, and system-on-a-chip (SoC) computing hardware (Intel, Nvidia, Qualcomm). This hardware powers the AI needed for Level 2 and Level 3 autonomy within ADAS features.
Analysts predict that the overall market for SDV hardware and software will exceed $1 trillion by 2035. Collaboration, or “co-opetition,” will become essential for automakers to establish partnerships that capitalize on each company’s strengths. Automakers can also monetize services and sales from SDVs. As connected cars, vehicles can become part of a smart home and facilitate payment services, ranging from streaming content to roadside assistance and smart home subscriptions.
Software has long played an important role in design and engineering, and advancements in interoperable data are facilitating that role. The centralization of design and engineering data on cloud-connected platform software helps remove barriers between departments. For example, design houses and automotive companies using Autodesk Alias and VRED software can easily share data and information between departments and speed up the design iteration process.
Trend 3: Rise of Autonomous Vehicles
Autonomous or self-driving cars and trucks have advanced significantly, making advancements in the field of controlled testing and real-world driving scenarios. Developments are being made that support autonomous vehicle research. Major automakers such as Ford, GM, Tesla, Volkswagen, and Volvo are testing the autonomous vehicle waters. There were also 1,400 self-driving cars being tested in the United States from more than 80 companies.
Driverless taxis from Pony.ai and Baidu are also operating in China. Driverless taxis require Level 4 autonomy on the SAE’s Level 0-5 scale of driving automation. (Mercedes-Benz’s Level 3 autonomy mentioned above amounts to a “traffic jam chauffeur,” limited to autonomy in specific driving conditions.) A McKinsey survey estimates that Level 4 robo-taxis will be viable at scale by 2030 and that fully autonomous Level 5 trucking could be ready between 2028 and 2031.
The complex interaction between cameras, radar, and LiDAR, which produce massive amounts of data to be processed by AI, is evolving. To convince customers and stakeholders of the new driverless-car mobility model, companies are using VR and simulation software to show how riding in an autonomous vehicle will look and feel.
Trend 4: New Business Models and Services
Economic uncertainty is driving interest in vehicle subscription models, particularly among younger demographics. Online vehicle sales and research are also gaining popularity.
Trend 5: Sustainability in the Automotive Industry
There is a major focus on sustainability within the automotive industry, with measures being taken to improve fuel efficiency, extend vehicle lifespan, and use recyclable materials in vehicle production. The 2024 Kia EV9 is an example, utilizing bioplastics, recycled plastics, and recycled materials for its interior fabrics and fixtures.
Trend 6: The Impact of AI and Machine Learning
AI, including machine learning and generative AI, is playing a significant role in the automotive industry, influencing design, manufacturing, and vehicle operation. AI is assisting automotive designers and engineers in many ways, including design and manufacturing processes. For automotive manufacturing, smart factories use embedded cloud-connected, data-collecting sensors and derive AI and machine learning data analysis insights to improve efficiency. These insights enable predictive maintenance, reduce machine downtime, and improve supply chain management. AI also powers and optimizes robotic processes such as assembly, welding, and painting. In-vehicle computer systems are increasingly likely to include AI voice assistants powered by a large language model (LLM) like ChatGPT.
Trend 7: Adoption of 3D Printing
3D printing or additive manufacturing accelerates prototype development, reduces part weight, and allows for the production of quick molds and custom aftermarket parts.
Trend 8: Integration of IoT in Vehicles
The increasing integration of the Internet of Things (IoT) in vehicles provides over-the-air updates and enables the vehicle to become an integral part of a driver’s smart home. Automakers benefit from this integration by collecting real-world data from connected customer vehicles to refine their vehicle digital twins.
Trend 9: Personalization and Customization
Personalization of the vehicle experience, including customized display designs, in-car AI assistants, and personalized seat settings, is becoming more significant in the automotive industry. Vehicle subscription plans provide a certain level of personalization as well.
Trend 10: Changing Safety Standards and Regulations
Advanced Driver Assistance Systems (ADAS) may soon be required on all new vehicles. Cybersecurity is also a major concern, and new regulations are being implemented to address connected car vulnerabilities.
With these converging trends, we are in an exciting period of automotive innovation. Designers and manufacturers must harness these technologies to deliver innovative solutions that benefit customers, businesses, and the planet.
