2025 in Automotive Software - Survival of the Fastest.

The automotive industry is undergoing a climbing shift as Software Defined Vehicles (SDVs) become the core discipline. The provided ecosystem evaluation outlines a roadmap of SDV progression and strategic transformations required for OEMs to remain competitive. Some remarks, I stopped adding Chinese Greenfield OEMs, @ Augustin Friedel ?? ?? ?? ?? Chapeau, to your endurance. ADAS is a must, Automated Driving fully differentiating, forget standards in this field.

OEMs in the SDV space can be grouped into four categories of brands: Premium, Mass, Quality, and Greenfield OEMs. Each category reflects distinct strategies, technological maturity, and approaches to SDV development.

Premium OEMs, such as Mercedes, Tesla, and BMW Group, are at the forefront of SDV innovation. They maintain strong in-house software talent by offering competitive salaries, creating innovation-driven cultures, and tightly integrating software capabilities into their vehicles. This allows them to deliver seamless, highly personalized experiences and to collaborate at the source-code level for rapid innovation.

Mass OEMs, e.g Toyota, Hyundai, and Stellantis, focus on scalability and cost-efficiency. They rely heavily on service suppliers to develop and maintain software platforms, allowing them to rapidly introduce SDV features to a wide market. However, many mass OEMs also own premium brands under their group umbrella, such as Toyota with Lexus or VW with Porsche. These premium brands often act as testbeds for advanced SDV technologies, which later trickle down to mass-market models. Despite this advantage, the reliance on external suppliers can limit innovation speed and cohesion across brands. A critical issue for mass OEMs is that 23 million cars produced annually under their brands remain stuck below SDV Level 4, unable to match the rapid advancements in SDV.

Quality OEMs, please find examples yourself, emphasize reliability and steady innovation. Their focus is on enhancing mechanical systems with software-enabling features, maintaining strong customer trust, and gradually incorporating SDV advancements. While dependable, their slower pace of transformation might limit their ability to compete with faster-moving OEMs.

Greenfield OEMs, such as Li Auto and Nio, are newcomers to the industry with a software-first approach. Free from legacy constraints, they adopt cutting-edge development practices, often starting at Levels 5–7 of the SDV ecosystem. Their agility and focus on AI-driven personalization enable them to challenge traditional players and carve out unique positions in the market.

Clustering SDV Levels 0–4: Building the Foundations

SDV Levels 0–4 represent the foundational stages of development, where OEMs focus on enhancing functionality through software and building basic frameworks for connectivity, updates, and upgrades.

Level 0 (Software-enabled) involves software augmenting mechanical systems without updates or connectivity. Transitioning to Level 1 (Connected) introduces basic information-sharing capabilities, but the software remains static in a dynamic environment.

The shift to Level 2 (Updatable) brings OTA (over-the-air) updates, allowing vehicles to maintain functionality without hardware changes. This stage establishes essential infrastructure for software scalability. Level 3 (Software Platform) enables cross-generational software upgrades, ensuring vehicles feel perpetually modern through dynamic functionality. Level 4 (Upgradable) integrates new features via software upgrades, blending dynamic functionality with static target hardware.

These levels focus primarily on technological enhancements, but the inability of mass OEMs to advance beyond Level 4 highlights a growing competitive gap. With 23 million cars annually stuck below this level, mass OEMs face increasing pressure to keep pace. The year 2025 will be pivotal, as companies unable to advance may struggle to retain market relevance.

Most of the Premium brands past this stage 3 years ago.

SDV Levels 5–6: A Cultural Shift dessert in OEMs

SDV Levels 5 and 6 introduce a fundamental cultural transformation in how OEMs approach software engineering, collaboration, and innovation.

Level 5 (Integration Platform) marks a shift where collaboration with third-party ecosystems becomes critical. OEMs must embrace external partnerships, integrating external functionalities via binary exchange and configuration. For mass OEMs, this is often facilitated through their service suppliers, while their premium brands may take on a more integrated in-house approach to preserve exclusivity and innovation. Premium OEMs, however, rely heavily on their in-house teams, enabling them to innovate faster and more cohesively.

Level 6 (Innovation Platform) further deepens collaboration, with third-party contributions extending to the source-code level. This demands agility, restructured engineering teams, and a culture that encourages rapid iteration and experimentation. Premium OEMs accelerate at this level due to their well-established internal software capabilities. Isn't it too simple to concentrate on one TIER1 per architecture? Not for procurement.

Mass OEMs often struggle to achieve similar agility, as their reliance on external suppliers creates a gap in innovation speed and cohesion across platforms. However, premium brands under mass OEM umbrellas often play a critical role in driving forward these advanced capabilities.

Level 7: Artificial Identity

At the pinnacle of SDV development, Level 7 (Artificial Identity), vehicles become intelligent, interactive entities capable of anticipating user needs and seamlessly integrating into their lives. Advanced AI, onboard machine learning, and hardware accelerators to enable ASICs and TPUs/NPUs/GPUs enable vehicles to act as personal assistants, offering predictive, highly personalized services. At this level, the vehicle is no longer a mere tool for transportation; it becomes an extension of the user, redefining the concept of mobility.

Additionally, it touches on the unique role of companies like Waymo, which operate not as OEMs but as TIER-1 providers or ecosystem players, reshaping the perception of vehicles in specific markets.

2025: The Year of Differentiation

The year 2025 is shaping up to be a turning point for the SDV market. With 23 million cars per year from mass OEMs unable to surpass Level 4, these companies face an uphill battle to remain competitive. As the market accelerates toward advanced SDV capabilities, differentiation will be defined by the ability climbing the SDV level. Taking bets against it on #CES2025

Premium OEMs and greenfield players are positioned to lead this evolution, leveraging their internal talent and agile cultures to innovate at pace. For mass OEMs, their reliance on service suppliers and slower innovation cycles may leave them vulnerable unless they make significant shifts. Their premium brands, however, could provide a critical lifeline, helping these groups stay competitive as they navigate this transformation.