In various ways, vehicles around the world are becoming like mobile phones with integrated software that updates periodically. As a consequence, the consumer experience can be rapidly improved with software without changing the vehicle.
The focus on software, including artificial intelligence (AI), has prompted a deep change in vehicle manufacturing. “The automotive industry is undergoing its most challenging transformation in over a century,” says a report by the World Economic Forum (WEF). Vehicles are rapidly evolving into software-defined systems anchored by centralised compute, modular architectures, and continuous updates. This shift decouples hardware from software lifecycles, dramatically redistributing value among original equipment manufacturers (OEMs), suppliers, and tech platforms. As control pivots from isolated components to integrated software stacks, traditional roles across the value chain are being thoroughly redefined, according to the WEF.
For years, automakers ran on fragmented software provided by different suppliers. As each hardware vendor was trapped in its own proprietary system, vehicles ended up with disconnected software.
Today, an increasing number of automakers are developing integrated software architectures. A recent McKinsey report projects the global market for automotive software and electronics to reach $519 billion by 2035 — growing at a 4.5 per cent compound annual rate, more than four times faster than the broader automotive market.
The rapid acceleration is driven by the rise of software-defined vehicles, AI and advanced driver assistance systems (ADAS). According to McKinsey, vehicles with Level 2 or higher automation could account for nearly 70 per cent of global sales by 2035. Level 2 systems are set to lead the pack at 52 per cent, with Level 3 autonomous vehicles taking a 16 per cent share.
The new architecture integrates a wide range of software — from ADAS and automated driving to infotainment, powertrain, chassis, body comfort, and connected security. As the market evolves, tech providers and automakers will increasingly co-develop software to align their needs and build a unified driving experience.
Vehicle security and passenger safety now go far beyond crash testing. As modern cars evolve into AI-defined, sophisticated digital devices, they also become vulnerable to cyberattacks. Every new car is essentially a mobile computing centre that continuously syncs with the Cloud, processes real-time data streams, and receives over-the-air system updates — all while leveraging AI to refine driver assistance and customise the in-cabin experience.
However, this connectivity introduces new vulnerabilities, making robust cybersecurity an absolute priority. For manufacturers, securing these systems must be integrated into every phase of a vehicle’s development and operational lifecycle — because a hacking incident in a moving car can be fatal. Consequently, automakers must adopt a comprehensive security approach that incorporates AI-driven defences. Upstream Security’s 2026 Global Automotive Cybersecurity Report provides compelling data on this rapidly shifting threat landscape.
Ransomware now drives 44 per cent of documented attacks — a more than twofold increase since 2024, according to the report. More than 61 per cent of these breaches threaten to disrupt thousands or even millions of connected vehicles simultaneously, highlighting a critical shift towards systemic vulnerabilities that jeopardise entire mobility fleets. Upstream’s researchers analysed 494 publicly reported automotive and smart mobility cyber incidents in 2025 for the report.
The writer is an economic analyst and author
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