AI Adoption Across Automotive Value Chain Set to Surge

The integration of artificial intelligence and other sophisticated technologies throughout the automotive value chain is projected to increase significantly over the next five years, according to a report from PwC. The proportion of firms utilizing these technologies is expected to rise from 47% at present to 72% in the 2030s.

Concurrently, over half (51%) of respondents identify AI as one of the most vital technologies for achieving strategic objectives, surpassing the 41% who prioritize battery and electric powertrains. Approximately 39% cited in-vehicle software connectivity as a key focus. This heightened emphasis on technology—spanning manufacturing, R&D, supply chains, and sales—emerges as intensifying competition and electrification reconfigure consumer expectations, and as digital-first, software-enabled vehicles become central to the mobility experience.

“The vehicle is no longer defined by the steel that leaves the factory – it is increasingly being defined by software, digital services and data analytics. As the sector faces increased competition and technology re-shapes the mobility experience, automotive makers must be putting their digital strategies front-and-centre if they are to unlock growth,” stated Harald Wimmer, Global Automotive Leader at PwC Germany.

Nearly half (46%) of participants view new entrants from adjacent sectors—particularly technology and energy—as a primary source of competition over the coming five years. However, the research identifies a significant disparity in corporate positioning: 80% of "future-fit" automotive firms identified in the analysis report a high tolerance for strategic risk-taking, compared to less than half (49%) of other companies.

As automotive firms encounter heightened competitive pressure, approximately 64% are pursuing ecosystem participation, making it the most frequently cited strategic initiative. Among the top 20% of "future-fit" organizations, this figure rises to 80%.

Much of this ecosystem focus is centered on technology. Automotive companies anticipate that technology firms will replace industrial manufacturers as their most significant collaborators over the next five years. The proportion of original equipment manufacturers (OEMs) identifying autonomous driving and advanced driver assistance systems (ADAS) as a top-three revenue source is expected to rise from 9% today to 24% by 2030.

"Future-fit" automotive firms are also more likely to report advanced software engineering and AI capabilities (71% vs. 45%), expansion into new customer segments (86% vs. 71%), and a diversification into offerings beyond the traditional automotive sector (72% vs. 45%).

However, the findings indicate a tension between securing current returns and financing future growth. While 76% of firms state they allocate capital to the highest-return initiatives, 73% report that their manufacturing and operations investments are primarily focused on productivity and efficiency. Only 12% indicated that such investments are intended for growth and market share expansion.

Capability deficiencies further complicate the transition. Half (51%) of respondents cite talent shortages, and 45% identify current workforce skills as significant barriers to value capture, while AI and software engineering remain the most critical competencies identified.

Electric vehicle production is projected to expand significantly, with battery electric vehicles (BEVs) expected to grow from 18% of production volume to 30% within five years. Conversely, traditional internal combustion engines (ICE) are forecast to decline from 60% to 41%. In China, this transition is more pronounced, with BEVs expected to reach 40% of production while ICE falls to 29%.

As the consumer landscape evolves, geography is also transforming the growth outlook for automotive firms. Less than one-third (26%) identify Western Europe as a top-three growth market over the next five years, while South and Southeast Asia are projected to see the most significant growth, rising to 45% and 44%, respectively.

Furthermore, the traditional consumer base is shifting. Respondents anticipate that 33% of revenue will originate from new customers within five years—including commercial fleet operators and mobility service providers—up from 21% today. “Automotive executives understand the disruption underway – from software to AI to energy – but their ability to act decisively is constrained by governance rooted in legacy priorities. To succeed, automakers must evolve their governance to balance capital discipline with the agility and strategic options needed to fund the next wave of innovation,” Wimmer added.