IDTechEx: significant confusion surrounds SDV core meaning

For the past five years or so, there has been general consensus in the recognition of the emergence of the software-defined vehicle (SDV) as a trend that has no less than reshaped the automotive industry, yet a study from IDTechEx suggests that despite widespread use of the term, there remains significant confusion around its core meaning, structural elements and the real-world driving forces behind its current status.

The study, Software-defined vehicles, connected cars, and AI in cars 2026–2036: Markets, trends and forecasts, provides a systematic analysis of the deployment pathways of typical vehicle SDV architectures, along with market research findings on future architecture transition timelines, sales forecasts and key hardware market opportunities.

Attempting a core definition of the SDV, the analysis says it serves as a catch-all phrase encompassing various technological advancements, from the evolution of electrical/electronic (E/E) architectures and decoupling software layers to reconfiguring operating systems.

The analyst states that “simply put, if it involves flexible, software-driven deployment, it likely falls under the SDV umbrella”, and notes that the automotive industry attributes the rise of SDVs to increasing consumer expectations, such as smarter functions, personalised experiences and “seamless” digital integration.

Moreover, it warns that without proactive marketing or consumer education from automakers, most users still have limited awareness of the deeper value behind “software-defined” capabilities. In addition, it says consumer demand remains largely rooted in tangible comfort and convenience features, like voice commands, navigation or heated seats, rather than more complex digital services, such as artificial intelligence assistants or in-vehicle e-commerce.

Furthermore, consumer familiarity with over-the-air (OTA) updates are regarded as remaining “surprisingly low”, resulting in slow adoption of subscription-based features.

Looking from the perspective of the SDV industry, the report says the drive towards SDV is primarily motivated by internal imperatives such as cost reduction of wiring and validation, platform standardisation, and data control. For automakers, it adds, SDV represents more than a shift in user experience, and is more a fundamental overhaul of vehicle development and system architectures.

Against this backdrop, the report notes that the evolution of an E/E architecture has become a fundamental enabler, transitioning from distributed architectures with over 70 electronic control units, several kilometres of wiring, and thousands of components, to domain control, then to zonal architectures and centralised computing platforms.

By standardising hardware platforms across multiple vehicle models, IDTechEx says automakers can flexibly differentiate features using software, enhancing profitability and market agility. To that end, technologies such as firmware over-the-air and software over-the-air are becoming critical tools enabling long-term revenue generation through feature unlocks, subscription and service monetisation.

Indeed, the study observes that SDVs are a potentially rich market to tap, projecting that the global annual revenue from software related to connected and software-defined vehicles will exceed $700bn by 2034, with a forecasted CAGR of 34%.

Regarding architecture implementation, the IDTechEx research highlights an emerging preference for zonal controllers paired with centralised computing platforms. Zonal controllers can now manage localised sensor inputs and actuator outputs, while centralised processors can handle higher-order tasks like sensor fusion, strategic planning and system coordination.

The study cited BMW’s Neue Klasse architecture as exemplifying this model, integrating high-performance computing modules for ADAS, cabin management, vehicle dynamics and powertrain control, interconnected via gigabit Ethernet for task management. This setup is designed to enable flexible, service-oriented software deployment, simplifying updates and facilitating dynamic cross-domain interactions.

IDTechEx estimates that for a mid-to-high-end SDV, the hardware investment in centralised computing platforms and zonal controllers alone can exceed $2,000 per vehicle, with future architectural convergence expected to lower total wiring costs by $50–$200 per unit.

From a systems engineering standpoint, SDVs were also seen as driving a shift towards greater system cohesion. New SDVs are now built around centralised, coherent software platforms where functions are orchestrated and coordinated through unified software layers. This centralised model is regarded as significantly enhancing maintainability and scalability, supporting advanced capabilities like real-time AI decision-making and edge computing.