How Software Is Changing the Auto Industry
Imagine you wake up in the morning and your car has new features due to an overnight update! Automakers are actually doing that now; they don’t just make machines that drive us around, they build software ecosystems. In the year 2023, the automotive software market was worth $19 billion, and the number is projected to hit $32 billion by 2030, which means it will grow about 8% annually.
Why is this shift happening? Well, the core reasons are EVs, AI, automation, and connectivity, which are all software-heavy. Today’s cars have over 100 million lines of code in their systems, which is actually more than most operating systems in phones and other devices! Hardware alone can’t keep up with all the changes in the market, so that’s why innovation lives mostly in code instead of engines now. Companies like BMW with its iDrive 9 or Mercedes with its MBUX platforms show that software defines luxury cars now.
Many cars that you buy now actually get better over time with an over-the-air update. These updates add features or will fix bugs remotely. Tesla introduced this type of technology, but now other brands like Ford, Hyundai, and BMW are catching up. Over-the-air updates or OTA updates do help fix issues without recalls, but software bugs are also causing record recalls in 2025.
Software-defined vehicles often include features that require subscriptions or are locked behind feature locks. Some car makers made heated seats or advanced driving assist be locked behind paywalls. Automakers predicted billions in recurring software revenue by 2030, like Mercedes offering acceleration boots as a subscription and BMW testing paid heated seats. It seems like these automakers are making people pay extra for features that used to come with the car or have a one-time extra fee.
There is also a challenge for traditional automakers. Moving to “zonal architectures” is expensive and complex. They are also competing with tech giants and sometimes losing. A lot of different carmakers will now have to think like app developers to stay relevant.
Other systems like Apple CarPlay and Android Auto were meant to help make the experience better, but companies like GM, Rivian, and Mercedes have been ditching both systems to build their own software. Why are they doing this? These automakers want more data control and the ability to make ecosystem lock-ins. GM wants drivers inside Ultifi, Rivian refuses CarPlay entirely, and Mercedes is building their own OS. Even Apple’s new CarPlay Ultra is facing resistance from brands that want their dashboards to stay more in their control.
Maybe you thought about it, or maybe you didn’t, but all this software actually makes for more risks with hackers, privacy leaks, and digital lockouts, making this technology very vulnerable. The cars also now track everything from routes, voice commands, cabin behavior, and even more! Regulators are even starting to step in with cybersecurity and data transparency laws. Trust will define the winners, and maybe one big hack could destroy a brand’s reputation super fast!
The auto industry’s biggest transformation isn’t under the hood; it’s actually in the code. By 2030, software could represent a lot of what a car is worth. The companies that lean into the new software will probably win, and those who don’t could fade away. The next time your car gets faster, safer, or smarter, it’ll probably happen while you’re sleep.
Has your car been updated overnight, and you felt it in the morning? Do you think cars should be heading down the road they are right now, or do you wish they were on a different road? Let us know in the comments!
Source: MarketsandMarkets Image: Rivian