Connected cars, the Internet of Things (IoT), autonomous technologies, the impact of smartphones on in-vehicle experience, and intensifying regulatory and safety mandates leave the automotive industry facing unprecedented disruption, according to a new report from Frost & Sullivan.

Original equipment manufacturers (OEMs) and Tier 1 suppliers are fast realizing that software investments must be a priority, the firm said. The report, “Digital Transformation of the Automotive Industry,” finds that digitalization spending will transform the component hardware-driven automotive industry into one focused on software and solutions, which will increase to a $82.01 billion market by 2020.

“Digital transformation will affect the entire automotive value chain, including design, production, distribution and retail, reshaping the traditional automotive business model,” said Sriram Venkatraman, Frost & Sullivan mobility senior consultant.

“New models will consider data, connectivity and customer centricity along with cyber security,” Venkatraman said. “As a result, the drivers of digital initiatives will change from CEOs, CIOs and the IT departments. By 2020, chief digital officers will steer the strategic and digital initiatives of OEMs across luxury and economy brands.”

Other upcoming market developments include robust upstream and downstream technology investments from automotive companies to realize recurring revenues from new services. IT spending will increase from $37.95 billion in 2015 to reach $168.8 billion in 2025, a compound annual growth rate of 16 percent.

“By 2030, the digitalization roadmap in the automotive industry will move from digital services to car-as-a-service (CaaS) to MaaS [mobility-as-a-service], making vehicles an element of a connected living solution,” Venkatraman said. “Automotive companies adopting custom digital initiatives after thorough analysis will be able to successfully leverage their software investments, access new markets, and easily adopt best practices.”

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Bob Violino

Bob Violino

Bob Violino is a freelance technology and business writer who covers a variety of topics, including big data and analytics, cloud computing, information security and mobile technology.