In the automotive industry, digitization has become more than just a trend; it's now a key determinant of success. The Gartner Digital Automaker Index 2024 gives us a comprehensive picture of how car manufacturers are integrating digital technologies into their products and business processes. The rankings reflect how well automakers are performing in various dimensions of digitalization—from software development to the incorporation of artificial intelligence (AI), cloud services, and over-the-air updates in their vehicles.
This year’s report highlights the widening gap between digital-first automakers like Tesla, emerging Chinese electric vehicle (EV) manufacturers NIO, Xpeng, and BYD, and traditional automotive giants like Volkswagen, Toyota, and General Motors (GM). The Index reveals that digital experience is not just a technological challenge but a strategic one—those who fail to adapt risk losing their competitive edge.
Source Credit: Automotive News Europe
In this article, we’ll dive into the key takeaways from the Gartner Digital Automaker Index 2024, including why some companies are racing ahead in the digital space and others are lagging behind. We’ll also explore how legacy manufacturers can close the gap and which digital strategies are reshaping the automotive landscape.
Tesla and Chinese EV Makers Leading the Way
Unsurprisingly, Tesla continues to sit at the top of the digital automotive food chain, with Chinese automakers like Nio, Xpeng, and BYD hot on its heels. These companies have embraced a "software-first" approach, ensuring that software is central to every aspect of vehicle operation—from battery management to entertainment and connectivity systems. Tesla, in particular, pioneered the idea of the "software-defined vehicle" (SDV), an innovation that allows for over-the-air updates, meaning cars can improve their functionality after purchase without a trip to the dealership.
Tesla’s lead is built on a foundation of aggressive innovation and continuous software integration. It is not just about hardware anymore; cars are becoming rolling computers, packed with sensors, AI capabilities, and connectivity. Tesla excels in these areas, and it’s no wonder that its dominance continues into 2024.
Source: The Verge, Tesla Presentation 2024
However, the most striking development in this year’s index is the rapid advancement of Chinese EV manufacturers like NIO, Xpeng, and BYD. These companies are not only keeping pace with Tesla but are quickly closing the gap by leveraging advanced digital platforms, AI, and software-driven ecosystems.
Chinese automakers have taken a page out of Tesla's book by designing vehicles that are essentially computers on wheels. Their vehicles are equipped with advanced over-the-air (OTA) update capabilities, ensuring that software upgrades, security patches, and new features can be installed remotely without requiring physical visits to dealerships. This feature alone represents a significant leap in convenience and customer experience, positioning these automakers as digital leaders.
Nio and Xpeng, in particular, have prioritized autonomous driving technology and smart cockpit systems. Nio’s NOMI system, an in-car AI assistant, is one example of how software and artificial intelligence are being used to personalize the driving experience in real-time.
Source: NIO.com
Similarly, Xpeng's focus on integrating self-driving capabilities into its vehicle lineup has allowed it to challenge Tesla's dominance in China’s highly competitive EV market.
Source: Xpeng.com
“Software is now as important to carmakers as horsepower once was,” Gartner’s report suggests. These top brands, led by CEOs with tech backgrounds, emphasize agile development, digital-first strategies, and a relentless focus on future-proof technologies like AI and autonomous driving.
What are the key factors that helped these companies succeed? Let's take a closer look:
- Tech-First Leadership: These brands are headed by CEOs who know their tech. They're not just car enthusiasts; they’re digital visionaries who see cars as mobile tech hubs.
- A “Software-First” Mindset: For Tesla, Nio, and XPeng, software isn’t an add-on; it’s the core of their cars’ DNA. They’re focused on updates, connectivity, and a seamless digital experience – treating every car like a smartphone, with constant upgrades.
- Culture of Agility: These companies live and breathe digital transformation, moving quickly to embrace change. This agility allows them to take risks and innovate faster, giving them a significant edge.
“Software is the new horsepower,” says Gartner, and these top brands have taken this to heart, racing ahead as true digital trailblazers.
Legacy Automakers, Playing Catch-Up?
While the digital-first automakers continue to innovate, traditional car manufacturers like Volkswagen (VW), Toyota, and General Motors (GM) are finding the digital transformation journey more challenging. Once the titans of the auto industry, these companies now find themselves grappling with the complexities of software integration, a far cry from their previous focus on mechanical engineering.
Gartner’s index shows these legacy manufacturers slipping in digital rankings. Companies like VW and Toyota have seen significant declines. Their challenges lie in the enormous cost and time required to develop and deploy a full-scale software system for vehicles. For example, the estimated cost to develop a comprehensive vehicle operating system is over $11 billion, according to Goldman Sachs. This massive financial commitment, coupled with internal cultural resistance and process inefficiencies, has slowed down their ability to adapt.
As of 2019 Volkswagen and Microsoft collaborate to develop the ‘Volkswagen Automotive Cloud’, one of the largest dedicated automotive industry clouds for all future Volkswagen digital services and mobility offerings. Together with Microsoft VW launched at the beginning of this year the Volkswagen AI Lab. With this VW aims to rapidly develop prototypes it can implement and distribute throughout its brands, such as Porsche.
Despite, Volkswagen’s struggles with its software unit, Cariad, are a prime example. Cariad has suffered from delays, budget overruns, and internal turmoil, prompting VW to partner with U.S. EV startup Rivian to bolster its digital capabilities.
Source: CARIAD
Similarly, Toyota’s Woven Planet division, responsible for developing its digital infrastructure and smart mobility services, has faced setbacks. Despite its pioneering work in hybrid and hydrogen technology, Toyota has been slower to embrace a fully digital transformation compared to its EV-focused counterparts. Gartner's report suggests that Toyota may be at a crossroads—either accelerate its digital strategy or face a more pronounced gap in the coming years.
General Motors, once a powerhouse of innovation, also saw its digital efforts plateau in 2024. The company has been focusing on its Ultium platform for EVs, but Gartner’s index reveals that GM has yet to fully unlock the potential of software-driven solutions and AI integration in its vehicles.
Why Are Legacy Automakers Struggling?
Despite their resources and heritage, many traditional car manufacturers face steep challenges in adapting to the digital age. The struggles of these giants underscore an uncomfortable truth: embracing digital transformation is complex, especially when it requires overhauling longstanding structures.
What’s Holding the Legacy Brands Back?
- Cultural Shifts: Traditional automakers are steeped in engineering cultures focused on hardware—building physical vehicles, optimizing engines, and improving manufacturing efficiency. In contrast, software development is iterative, fast-paced, and requires a more agile, collaborative approach. The culture clash between these two worlds often results in delays and mismanagement.
- Talent Gaps: To create world-class software platforms, carmakers need to attract top-tier talent from tech industries—talent that might be more drawn to companies like Google, Apple, or even Tesla. Bridging this skills gap is essential, but difficult, especially for companies that historically haven’t been known for their software capabilities.
- Complexity in Software Development: Unlike building physical components, software development is never truly “finished.” There is always room for improvement, and the capacity for vehicles to receive over-the-air updates adds to this complexity. Tesla’s continuous updates give it a competitive edge, but legacy automakers still treat vehicles as static products rather than platforms that can be upgraded post-purchase.
“The automotive industry is experiencing a paradigm shift where hardware becomes secondary, and software takes center stage.”
Digital Services and Software: The Future of Automotive Revenue?
For legacy automakers, the stakes have never been higher. The profitability of electric vehicles is currently razor-thin, with high development and production costs eating into margins. However, digital services present a lucrative opportunity for growth. From software subscriptions to connected car ecosystems and data monetization, automakers who successfully transition into digital-first companies stand to reap significant financial rewards.
According to Accenture, digital services are projected to generate around $3.5 trillion by 2040, accounting for nearly 40% of total global automotive revenue. Today, these services generate only about 3%, or $300 million, globally. For carmakers, this represents an enormous opportunity to boost profits through subscription-based software services, including navigation updates, autonomous driving capabilities, and even personalized entertainment packages.
Source: Accenture, Financial Times
Some automakers, such as Ford, are already beginning to see the benefits of digital transformation. Ford’s Pro Software platform, for instance, has seen a 40% growth in subscriptions this year. Still, even companies like Ford have faced challenges, particularly when it comes to making a profit on EVs. Rising costs have forced them to back away from ambitious targets, highlighting the difficulties traditional automakers face in this transition.
What Is Next?
The message from the Gartner Digital Automaker Index 2024 is clear: if carmakers want to survive and thrive in the EV age, they need to rethink their approach to software. It’s not just a nice-to-have—it’s the new engine that will drive future success. Automakers like Tesla and the leading Chinese brands have already shown the world what’s possible when you embrace a software-first mentality. For legacy giants like Toyota, VW, and GM, the road ahead will be tough, but the rewards are enormous for those who manage to adapt.
As Volvo’s Anders Bell aptly put it, "If you can't as an engineering organization keep up with the general technology speed of society, then you will be left behind." The stakes are higher than ever, and the race to become digital isn’t just about who builds the best car anymore—it’s about who builds the best platform.
Digital Transformation for Automotive Tier 1 to 3 Suppliers and OEMs
For established automotive brands, the Digital Race is just another race they can win, armed with the resources to innovate and experiment. But for Tier 1 to Tier 3 suppliers and OEMs, the stakes are higher: adapt quickly or risk being left behind.
As a subcontractor or OEM, you may find yourself asking: are you ready to deliver what car brands and consumers will demand tomorrow?
The shift towards digital integration opens up vast opportunities, but it also presents real challenges. It's no longer just about manufacturing parts; it's about evolving from a traditional supplier to a proactive technology partner that can offer integrated digital services.
At Oneest, we understand this transition and are committed to helping you navigate the complexities of digital transformation. Whether you lack the expertise to get started or are unsure about the next steps, we are here to support you in planning your digital strategy.
Our tailored solutions focus on equipping your business with the tools needed to thrive in this new landscape. We specialize in:
- Custom Enterprise App Development, done according to your unique business processes to enhance operational efficiency.
- IoT Integration, enabling real-time data and connectivity, allowing you to create smarter products and services.
- Cloud Services, providing you with the right scalability and flexibility required for your systems and help you reduce infrastructure costs.
- Data Analytics and Dashboards to transform raw information into actionable insights that drive better decision-making.
- Digital Transformation Consulting to ensure your technology initiatives align with your long-term goals.
From designing intuitive user interfaces to developing cutting-edge AI algorithms, we're committed to empowering our automotive customers with the tools they need to stay ahead of the curve. Whether it's streamlining production processes or enhancing the driving experience through advanced vehicle connectivity, our expertise extends across the entire automotive value chain.
Contact us today to schedule a meeting, and let’s explore how we can help you leverage digital solutions and technology to meet your unique needs and drive your business forward.
Final Thoughts
The 2024 Gartner Digital Automaker Index is a game-changer, underscoring the importance of digital transformation in the car industry. Brands like Tesla, Nio, and XPeng aren’t just building cars; they’re building an experience powered by tech, connectivity, and continuous evolution.
Will traditional giants find the speed to keep up, or will they be left watching the taillights of a new kind of automaker? One thing’s for sure – in this race, the true power isn’t under the hood; it’s in the software steering the future.
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