The IBM Institute for Business Value’s new “Automotive 2035” study shows that by 2035, 80% of new cars will have an electrified powertrain, like electric or hybrid engines. This is part of a shift in the auto industry toward more digital and AI-driven vehicles.
The study, based on interviews with 1,230 automotive executives in nine countries, reveals that 74% of those surveyed believe cars will be completely controlled by software and AI by 2035. The report also noted that 75% say the software experience will be the most important part of a car brand’s value.
Automakers are also trying to move from selling cars once to offering ongoing services and products that drivers can subscribe to, creating a new way to make money.
“The shift to software-defined vehicles (SDVs) was cited by the majority of industry executives as the key to future brand developments,” said Jeff Schlageter, GM for Automotive Industry at IBM. “It is indicated that vehicle value may no longer be limited to initial features and functionality — it would be earned over the life of the vehicle by continuously providing superior customer experiences with new applications and subscription-based services for drivers.”
The study also says the auto industry needs to spend more on digital technology. Right now, only 21% of research and development budgets go to software and digital projects. By 2035, that number is expected to rise to 58%.
However, the study also highlights challenges. Seventy-seven percent (77%) of executives say they don’t have enough software development tools, and 74% say the industry’s focus on mechanics is slowing the shift to more digital products.