Automotive Software Market

Market Overview

The global automotive software market size was valued at USD 19,123 million in 2021, envisioned to reach USD 57,689 million growing at a CAGR of 14.8% during the forecast period. 

Diverse industries are attempting to adapt as swiftly as possible to the rapid transition to digital technology. Software and mobile applications have made things so simple and convenient that business owners can maximize their use. Automotive software consists of programmable data instructions to execute computer-based in-vehicle applications. Automotive software also includes the software used for embedded systems within vehicles.

In-vehicle computer applications comprise telematics, infotainment, powertrain, body control and comfort, communication, advanced driver assistance systems (ADAS), and protection. The automobile industry is headed toward a future in which cars communicate with one another and drivers. With so many vehicles requiring maintenance or repair, it is difficult for the employees to complete tasks and keep track of them. Every workshop, garage, and car shop should invest in the proper automotive software. These technological improvements have necessitated the incorporation of vehicle software solutions that provide enhanced usefulness and convenience for customers by automobile manufacturers.

Usage of ADAS technologies in vehicles, increasing usage of connected car services, and the introduction of technological innovations for enhanced UI are anticipated to boost the automotive software market expansion. However, the absence of standard protocols for developing software platforms, a lack of linked infrastructure, and the troubleshooting and servicing of automotive software impede the industry of automotive software expansion. Moreover, the potential of 5G and AI, the increasing development of semi-autonomous and autonomous vehicles, and the monetization of data in the extended automotive ecosystem are among the aspects that are anticipated to create attractive growth prospects for the market.

Market Dynamics

Market Driving Factors

The Implementation of ADAS Features and Connected Car Services to Aid Growth

The automotive sector has made significant strides in self-driving car technology in recent years, and advanced driver assistance systems (ADAS) are a vital component of this technology. In addition to the growing demands for advanced safety systems like adaptive cruise control and autonomous emergency braking systems, as well as the increased government regulations to reduce road crashes, the major automotive OEMs are incorporating ADAS features into the next generation of vehicles. With features like lane monitoring, emergency braking, stability controls, and others that are essentially software-driven, ADAS technologies have considerably simplified driving. As a result of the incorporation of ADAS features into the next generation of vehicles, many Tier 1 businesses and OEMs are forming partnerships with software development companies to create advanced ADAS software. As a result, the market for automotive software is expanding.

Additionally, connectivity is now a standard feature of all electronic devices, including autos. These services enable automobile manufacturers, fleet operators, and drivers to improve resource utilization, increase safety, automate certain driving functions, and generate essential data, such as vehicle performance and road conditions. Embedded, integrated, cloud or tethered connection options can be utilized to provide connected car services in a vehicle. Numerous linked car services necessitate software for their distinct functionalities. In addition, the demand for connected car services is primarily attributable to a rise in safety and security concerns, a surge in demand for a better driving experience, and the advent of the internet of things (IoT) in the automotive sector. Therefore, the expansion of automotive software for connected services is attributable to the rising number of advanced services offered in linked vehicles.

Market Restraining Factors

The Lack of Standards to Create Software Platforms to Hinder Market Growth

There are several security concerns since the rising number of connected gadgets makes the automotive system vulnerable to hacks and attacks. In addition, because of the absence of standard protocols, software issues such as system security and integrity have surfaced as significant problems to be resolved. Consequently, this has several policy ramifications, including the difficulty for policymakers to simplify and regulate a varied array of vehicles with varying operating limits. Owing to the unavailability of protocols for software development, software compatibility difficulties may hamper the automotive software market growth.

Market Opportunities

5G and Artificial Intelligence Future Potential to Boost Market Opportunities

Artificial intelligence (AI) and 5G will play a significant role in the automotive sector's future as predictive capabilities become more ubiquitous in automobiles and the driving experience is increasingly personalized. More manufacturers are employing data-driven algorithms to automate the process of configuring a vehicle, including the infotainment system and application preferences. In addition, 5G is better prepared to carry out vital communications for safer driving, support expanded vehicle-to-vehicle (V2V) connectivity, and enable connected mobility solutions. Consequently, the vast array of 5G and AI applications in future mobility is anticipated soon to provide profitable growth prospects for the automotive software market.

Regional Analysis

The region-wise segmentation of the global automotive software market includes North America, Europe, Asia-Pacific, and LAMEA.

The Asia Pacific And Europe Will Dominate The Regional Market

The Asia Pacific will command the market with the largest share while growing at a CAGR of 16.9%. Rapidly expanding luxury car sales in emerging economies such as China, Thailand, and India are anticipated to fuel the expansion of the Asia-Pacific automotive software industry. This region's automotive software industry is primarily driven by the rapid growth of intelligent transportation systems and connected mobility in nations like China and Japan. For example, in 2019, members of the 5G Automotive Association (5GAA), SAIC Motor, China Mobile, Huawei, and Shanghai International Automobile City announced the world's first 5G-based smart transportation demonstration project to begin in 2020. This initiative will take place in Shanghai International Automobile City. The four businesses are collaborating on 5G internet communications, intelligent driving, intelligent mobility, supporting infrastructure, and piloting 5G-based services for smart driving and intelligent mobility.

Europe will hold a share of USD 20,612 million, growing at a CAGR of 15.4%. Increasing adoption of various software-based technologies such as ADAS, in-vehicle infotainment, and telematics are some factors driving the expansion of the automotive software market share in European countries. Other factors contributing to this growth include the expanding automobile sector, technical advancements, and government laws that aim to improve the diving experience. For instance, the SMMT or Society of Motor Manufacturers and Traders forecasts that by 2025, more than 95% of the vehicles currently operating on the roads in the United Kingdom will be linked vehicles. The subsequent government laws about driver safety & security issues are demanding automakers to provide in-vehicle infotainment with hands-free connected calls, which is driving the growth of the automotive software market in the European region.

Segmental Analysis

The global automotive software market is classified based on application, product, vehicle type, and region. 

By Application Analysis

Based on application, the fragments include safety systems, infotainment & telematics, powertrain, and chassis.

The infotainment & telematics segment is projected to advance at a CAGR of 16.5% and hold the largest market share. Combining hardware and software, infotainment & telematics systems provide vehicle entertainment, telephony, and informatics services. This consists of hardware and software for the navigation unit, display, and media players, as well as connectivity features like mobile phone connectivity, voice control, traffic updates, and vehicle-to-vehicle communication. The Infotainment & Telematics section of the automotive software industry will bolster the rising demand for smartphone functionalities in automobiles and technological developments. Government rules for car telematics and the increasing popularity of connection solutions also contribute to the expansion of the automotive software market share

The safety system segment will hold the second-largest share. Automotive safety systems are vehicle technologies that aid in preventing and mitigating collision-related injuries. Automotive safety system comprises software for advanced driver assistance system (ADAS), anti-lock braking systems (ABS), electronic stability control (ESC), adaptive cruise control (ACC), driver monitoring system (DMS), blind-spot detection (BSD), and other safety systems. The expansion of this category is anticipated to be stimulated by the increased demand for safety mechanisms in automobiles caused by the implementation of stringent regulations mandating their installation.

By Product Analysis

The fragments include operating systems, middleware, and application software based on the product.

Application Software to Be the Dominant Product Owing To Increasing Demand for Smartphone-Based Infotainment Software System

The application software segment is projected to grow at a CAGR of 14.3% and hold the largest market share. Application software performs specialized functions for a user. Each application is created to aid the user with a particular task, which may be connected to the vehicle's functioning, productivity, or communication. The increasing demand for smartphone-based infotainment software systems, real-time onboard diagnostic systems, and automobile maintenance is anticipated to drive growth in the automotive software market's application software sector. In addition, the rising popularity of Over-the-Top (OTT), in-vehicle commerce, and on-demand connected automobile services create a lucrative potential for application software.

The middleware segment will hold the second-largest share. Middleware is software that resides between an operating system and executing applications. Middleware for the automotive industry offers high-level communication services for application-level tasks. Increasing Internet of Things (IoT) penetration and a growing link database in the automobile industry are the primary reasons driving the growth of the middleware section of the market. In addition, the increasing use of connected vehicles is anticipated to contribute to the advancement of the automotive software market throughout the forecast period.

By Vehicle Type Analysis

Based on vehicle type, the fragments include:

• ICE passenger cars.
• ICE light commercial vehicles.
• ICE heavy commercial vehicles.
• Battery electric vehicles.
• Hybrid electric vehicles.
• Plug-in hybrid electric vehicles.
• Autonomous vehicles. 

The ICE passenger car segment is projected to advance at a CAGR of 11.1% and hold the largest market share. ICE (Internal Combustion Engine) passenger cars are gasoline- or diesel-powered automobiles with at least four wheels and no more than eight seats in addition to the driver's seat. The expansion of the global market in the passenger car segment is propelled by the increasing demand for connected vehicles and vehicle safety regulations. In addition, rising discretionary money, a high need for personal mobility, rising per capita income, and a better way of life have increased the demand for passenger automobiles with advanced software-based in-vehicle capabilities. The automotive software industry is anticipated to be driven by these factors during the projected period.

The autonomous vehicles segment will hold the second-largest share. Using various in-vehicle technologies, sensors, and software, such as adaptive cruise control, active steering, anti-lock braking systems, GPS navigation technology, lasers, and radar, an autonomous vehicle can drive itself in "autopilot" mode from a predetermined starting point to a predetermined destination. Autonomous cars rely heavily on software, and the rising deployment of autonomous driving capabilities has a beneficial effect on the automotive software market growth. In addition, the leading automobile manufacturers are engaged in R&D and testing for autonomous vehicles, which is anticipated to stimulate further the need for automotive software in the autonomous vehicle segment.

Recent Developments

• In 2022, Adobe Inc. introduced Frame.io as a creative cloud that will allow for seamless collaborations in the cloud. 
• In 2022, Adobe Inc. announced new AI innovations powered by Adobe Sensei for personalizing experiences.