Automotive in the AI era

From the development of autonomous driving to the delivery of electric vehicles, the automotive industry has been at the forefront of AI deployment. Cars are rapidly evolving into software-defined vehicles (SDVs), and AI will be essential for this transformation. In fact, 79% of automotive OEM executives expect their SDV efforts to progress in the next three years, and 76% believe AI will contribute to this progress. 
 

Steering toward new product innovations and revenue models

The automotive industry is moving beyond selling vehicles and aftermarket parts to generate more recurring digital revenue from experience. Today, digital- and software-related revenue represents 15% of total auto industry revenue. However, this share is expected to rise dramatically to 51% by 2035. 

Near-term, OEM executives expect the share of total revenue attributable to AI to increase from 5% today to 9% in three years. One particularly promising area is fleet management services, including predictive maintenance and service subscriptions. For consumer-focused services, executives see voice assistants as an immediate opportunity to grow revenue.

Autonomous driving may be the most prominent use case of an AI-enabled driving experience, with 64% of industry executives saying this capability will be one of the top customer expectations by 2035. 
 

During the next three years, auto executives expect to use AI to increase the perceived value of products by 22% and the perceived value of digital services by 37%.

Building an AI foundation for the future

Most companies currently focus on building foundations for SDV technologies and processes. These activities include re-architecting in-vehicle electrical and computing platforms, updating product development processes, introducing new software development tools and methodologies, and creating regulatory compliance processes. According to 64% of executives, AI is integrated in all aspects of this long-term innovation strategy.

Overall, auto executives are looking to AI to increase the perceived value of products by 22% and the value of digital services by 37% over the next three years. 

In-vehicle edge applications represent a highly promising area of AI-driven product innovation. Because vehicles do not always have stable connectivity, and onboard computing resources aren’t as powerful as cloud-hosted services, running AI models in cars provides many advantages. Processing critical AI workloads at the edge, in vehicles, enables more efficient use of AI intelligence in back-end cloud environments.

Edge AI can process simple voice commands, local personalization, immediate vehicle status alerts, and real-time driver monitoring. 
 

61% of automotive OEM C-suite executives say AI will contribute significantly to their revenue in the next three years and 63% believe investing in AI will deliver clear and measurable competitive advantage.

Integrating AI into operating models for growth and innovation

Innovation and digital reinvention are essential for a competitive advantage in the automotive industry. But while the industry picks up the pace toward a software-defined future, 74% of auto executives recognize that this transition will encounter institutional and cultural roadblocks. Here, AI can make a decisive difference by enabling automakers to make great strides in efficiency while building operating models that revolve around innovation.

For example, AI is projected to contribute significant efficiencies in the massive testing and simulation workloads required to make autonomous systems safe, reliable, and secure. In this application, generative AI is expected to reduce software-defined vehicle workloads by nearly 40% during the next three years.

In manufacturing operations, great expectations are in store for AI-powered robotics and automation as automotive companies shift core operations to software-defined manufacturing. But this complex transition will require changes in job roles and new AI-related skills. Access to an AI-savvy workforce will be key to unlocking tangible results from AI investments.
 

65% of auto OEM executives say they have a clear approach to integrate AI into long term innovation strategy. 79% also say that AI investment is strongly supported by senior leadership.

Putting new ideas on the road for sales, marketing, and aftermarkets

Automotive companies are increasingly leveraging AI to enhance sales and marketing activities. Industry executives anticipate productivity gains of 7% in customer support and a 5% improvement in overall marketing budgets and customer acquisition metrics, due to AI integration. 

As vehicles become increasingly defined by software, they can be updated with new performance characteristics and security features throughout their lifecycles. To this end, streamlining over-the-air software updates and developing new service and after-sales operations will be core capabilities. Supporting a software-updating ecosystem will require closer relationships with customers over an extended period and create ongoing opportunities to extend and enhance customer mobility experiences.

Download the report to help your automotive clients understand how AI can provide a differentiating edge in a mobility marketplace where SDVs, autonomous vehicles, and digital experiences will increasingly rule the road.