This report provides Transforma Insights’ view on the Vehicle Diagnostics market. This segment comprises two Applications: Vehicle Diagnostics Head Unit and Vehicle Diagnostics Aftermarket.
Vehicle Diagnostics is an important feature that enables manufacturers and vehicle owners to identify faults and issues that may be systemic across their vehicles or fleets at an early stage.
The market is dominated by diagnostics features that are built into vehicles by OEMs and connected via the Vehicle Head Unit. The provision of such services helps OEMs maintain a relationship with their customers and represents an additional service to add to a chargeable connected vehicle offering. Owners benefit from real-time updates on vehicle condition, and reduced maintenance costs and servicing time. For the OEMs, it’s also another way of advertising new products, services, and benefits to the existing customers. For instance, Mercedes-Benz persuades customers to service their cars at authorised car dealerships to avail themselves of benefits in the form of discounts and free diagnosis.
The growing adoption of connected diagnostics is also being supported by regulatory requirements. UNECE Regulations R155 and R156 became mandatory for newly produced vehicles in the EU, the UK, Japan, South Korea, and other UNECE contracting markets from July 2024. They require OEMs to implement certified cybersecurity and software update management systems throughout the vehicle lifecycle. Technological advancements are further accelerating adoption through remote fault identification and reduction in vehicle. The emergence of software-defined vehicles (SDVs), artificial intelligence, and predictive maintenance capabilities is increasing the importance of continuous vehicle monitoring and diagnostics. OEMs such as Tesla, BMW, and Mercedes-Benz have expanded investments in connected vehicle platforms that are capable of monitoring vehicle telemetry, software performance, battery health, and component condition in real time.
Aftermarket devices are usually purchased by vehicle owners or technicians. These devices can be plugged into OBD-II ports and are typically equipped with Short Range technology, such as Wi-Fi and Bluetooth. As vehicles become more complex, fault identification will become increasingly challenging, and diagnostics devices will be increasingly required. Home mechanics will purchase these devices to avoid paying additional fees for vehicle servicing.
The report provides a detailed definition of the sector, analysis of market development and profiles of the key vendors in the space. It also provides a summary of the current status of adoption and Transforma Insights’ ten-year forecasts for the market. The forecasts include analysis of the number of IoT connections by geography, the technologies used and revenue. A full set of forecast data, including country-level forecasts, sector breakdowns and public/private network splits, is available through the IoT Forecast tool.
This section of the report briefly explains the two main categories of the vehicle diagnostic market: vehicle diagnostics head unit and aftermarket devices. The report examines key factors that are influencing the development of the market, including:
This section argues that since most vehicles are already enabled with cellular connectivity when they are produced, OEMs can remotely monitor such vehicles.
This subsection first explains why manufacturers enable vehicle diagnostics and maintenance features in their connected vehicles. For example, this feature identifies defects in vehicles much before they become major issues. This enhances the reliability of vehicles, which is a high priority for many prospective purchasers these days. It then adds that the market is gradually shifting from fault detection towards predictive maintenance. In this, AI and machine learning enable predictive maintenance by analysing vehicle data to anticipate failures, reduce downtime, improve vehicle availability, and lower operating costs.
This point discusses how remote diagnostics and monitoring of vehicles ensure continuous revenue streams for manufacturers (especially from servicing vehicles) and allow them to better engage with their customers. Besides, users are also encouraged to visit manufacturers’ service centres, instead of independent alternatives, thereby enhancing long-term revenue opportunities for the manufacturers. Case in point, BMW had delivered over 10 million remote software upgrades across its connected fleet by end-2024, with OTA capabilities available in more than 9 million vehicles worldwide.
This subsection explains why the capability of remote software updates in vehicles is gradually becoming crucial for OEMs (since remote updating ensures a more convenient and time-efficient approach to recalls, which is allowed by the vehicle diagnostics application). Besides, using OTA updates, OEMs can save a significant amount as well. For instance, it is anticipated that OEMs saved nearly USD500 million from OTA recalls in the United States in 2023.
This subsection explains how the increasing number of autonomous vehicles (which, according to Transforma Insights’ estimates, should be around 53 million by 2035) will dramatically reduce the likelihood of fault detection by users themselves, which in turn will increase the use of vehicle diagnostics devices – for better maintenance of autonomous vehicles.
Software-defined vehicles are increasing demand for advanced diagnostics covering both physical and digital components, with OEMs such as BMW, Mercedes-Benz, and Volkswagen deploying OTA updates, remote diagnostics, and continuous software monitoring.
This section expounds upon how regulatory requirements are increasingly driving the adoption of remote diagnostics and over-the-air (OTA) update capabilities. For instance, in response to UNECE R155 and R156, which require OEMs to maintain certified cybersecurity and software update management systems throughout a vehicle’s lifecycle, OEMs such as Hyundai are investing in cybersecurity systems, OTA update platforms, and remote vehicle diagnostics.
This subsection discusses some of the issues that may hamper the adoption of vehicle diagnostics devices, such as improvements in vehicles’ reliability in recent years and increasing privacy challenges. For instance, in 2016 the Tesla Model S’ in-vehicle security was sabotaged, which led the firm to introduce a security code sign-in protection. It also provides a few examples of relevant IoT deployments in this application, such as Tesla recalling more than 2 million vehicles through OTA remediation.
This section first charts the reasons why vehicle owners and home mechanics purchase external or aftermarket diagnostic tools that can be attached to vehicles’ OBD-II ports, such as a lack of telematics units in many vehicles. It then talks about the basic functionality of aftermarket devices and the connectivity technology they use. For instance, aftermarket devices can monitor and diagnose vehicles’ health and alert drivers about maintenance requirements. It further adds that regulatory developments are also supporting continued access to aftermarket diagnostics as vehicles become increasingly software-defined. For example, in the US, Massachusetts and Maine have introduced right-to-repair provisions covering access to vehicle-generated and telematics data used for diagnosis, repair and maintenance.
It then focuses on the subscription-based services for these devices that many aftermarket vendors offer and claims that the cost of these services depends on capabilities and use cases. It then adds that products that are meant for the consumer market mostly have less features, are simpler to use, and are comparatively cheaper. For instance, Carly’s consumer-focused OBD-II solution combines a Bluetooth scanner with subscription-based software. Its USD89.8 Basic Package includes the Carly Universal Scanner and basic fault-code reading, but no annual license or advanced features. It also adds that fleet management and UBI providers may reduce demand for standalone vehicle diagnostic devices by integrating vehicle diagnostics into their connected solutions.
It also discusses a few relevant products in this application (such as Launch X431 Pro Elite scanner and Carman Auto-I 100), and talks about their functions, features, and subscription costs.
The key vendors section lists some of the main providers of products and services related to the market, such as Autel, Hyundai, Tesla, Launch Technology Company, Actia Group, Bosch, Snap-on, and Texa. The report provides profiles of the various vendors including aspects most relevant to this Application Group, such as product offerings, pricing, financial results, and technology.
In the market forecasts section, we provide a summary of the forecasts from the Transforma Insights IoT Forecast Database:
The report charts the growth in the number of devices, which will grow from 34.7 million in 2025 to 40.5 million in 2035. Transforma Insights forecasts are compiled on a country-by-country basis. This report includes a regional summary, showing splits between Australasia, Greater China, North America, Europe, Japan, Latin America, MENA, Russia & Central Asia, South East Asia, South Korea, India & South Asia, and Sub-Saharan Africa.
Transforma Insights’ IoT forecasts include splits between the various connectivity technologies as follows: 2G, 3G, 4G, 5G mMTC, 5G non-mMTC, LPWA (non-mMTC), Satellite, Short Range, and Other.
This section discusses which technologies will be used in the vehicle diagnostics application group.
This part of the report discusses the market growth in terms of revenue (module revenue, service wrap revenue, and VAC revenue). Transforma Insights estimates that the revenue in the Vehicle Diagnostics Application Group will grow at a CAGR of 9.4%.
