The automotive industry has been investing heavily in the digitisation of vehicles, with software increasingly becoming the foundation for delivering value-added features and capabilities. This marks a significant shift from an earlier era, where hardware was the primary focus. At the same time, customer expectations are also evolving. Drivers now want more personalised in-vehicle experiences, along with features such as autonomous driving, greater comfort, and improved convenience.
This blog explores the fundamentals of software-defined vehicles (SDVs), beginning with an overview of what they are, the benefits they offer, and the challenges associated with their adoption. It also outlines transitional stages in the evolution of software-defined vehicles, showing how the industry has progressed towards fully software-defined vehicles although that vision has not yet been fully realised. For detailed insights into SDVs, including the value chain, key vendor profiles, and analysis of the implications for telecoms providers, please refer to Transforma Insights’ report, ‘Software-defined vehicles: software takes a front seat in the automotive industry’.
A software-defined vehicle is designed to be modular, programmable, and connected. Instead of model differentiation relying primarily on changing or adding hardware components, many of its features and functions are controlled and improved through software. An SDV can add new features and functionalities through software updates, and operating systems and many vehicle capabilities can be updated without extensive hardware changes. This results in vehicle owners becoming less dependent on service centres for routine feature enhancements and vehicle system fine-tuning. Ultimately this results in a more convenient customer experience, as improvements can often be delivered remotely.
The adoption of SDVs offers significant benefits to OEMs, suppliers, and customers, including a range of aspects discussed in the following subsections.
Feature-rich SDVs can be tested and rolled out in the market faster than non-SDVs by virtually validating functionalities and often without significant hardware modifications, enabling more rapid innovation.
SDVs enable rapid identification of emerging maintenance issues by supporting predictive maintenance and early identification of potential vehicle faults.
As the industry moves towards SDVs, OEMs can reuse existing software modules to reduce development costs and improve efficiency. Simultaneously, they can also unlock new revenue opportunities by using the large volumes of data generated by SDVs to develop valuable new services and value propositions.
SDVs enable OEMs and automotive companies to design more intuitive in-vehicle experiences that reflect local market needs and customer expectations. Specific customer preferences that can vary significantly across regions can be readily catered for.
Despite the benefits of adopting a software-centric approach to vehicle manufacturing, there are several challenges for OEMs and automotive suppliers, including a range of aspects discussed in the following subsections.
OEMs and automotive companies have traditionally worked in silos, with separate teams responsible for areas such as chassis, infotainment, braking, and powertrain. This structure becomes a barrier as vehicles grow more interconnected, making cross-domain collaboration and continuous integration/continuous development (CI/CD) essential for SDV development.
With software being a critical component of SDVs, automakers must implement a robust security architecture, embedded and continuously maintained across a vehicle’s lifecycle. Otherwise, any lapse in security could put drivers, passengers, and vehicles at risk.
Turning vehicles into software-centric systems is a major engineering challenge. Many vehicles today have around 150 electrical control units (ECUs) and reducing that footprint requires OEMs to virtualise ECUs and develop millions of lines of code.
Similar in approach to SAE International’s defined levels of autonomous driving (SAE Level 0 corresponds to no automation, Level 5 to full automation), we have developed an architectural evolution framework that classifies SDVs based on their capabilities, autonomous functionality, updateability, and lifecycle flexibility. The framework segments vehicles from Gen1 to Gen5 according to the key features and functions required for OEMs to achieve a fully software-defined vehicle. The framework is illustrated below.
The shift toward software-defined vehicles represents a pivotal transformation in the automotive industry, redefining how vehicles are designed, built, and experienced. As software increasingly becomes the primary driver of functionality, OEMs are moving beyond hardware-centric models toward continuously upgradable, connected platforms that better align with evolving customer expectations. Although fully software-defined vehicles remain an emerging vision, the direction of travel is clear. Ultimately, SDVs will reshape mobility by enabling more intelligent, adaptive, and service-oriented vehicles that extend well beyond traditional automotive boundaries.
