Automotive

The automotive industry in 2025 is doubling down on its drive towards electrification. Increased battery production, growing infrastructure, and consumer demand are some of the key enablers that will assist this transition over the coming years.

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What is the current position of the automotive industry?

2025 will likely see a flurry of activity in joint ventures, spin-off companies, and mergers as companies attempt to manage profitability while protecting future growth.
Additionally, the industry has seen massive investment, enabling new product development that supports future business models, such as:
– Autonomous and assisted driving (ADAS) vehicles
connected vehicles utilizing 5G and Internet of Things (IoT) technologies:
– Electric and hybrid vehicles
– Industry 4.0 advanced manufacturing production methods
– Software-centric architectures
– Subscription-based ownership.

Automotive Industry Trends & Challenges

The automotive industry has faced significant challenges in recent years. Declining sales volumes predate the pandemic and continue to plague the industry. The pandemic also highlighted significant fragility in the supply chain, and the lack of resilience brought the industry’s JIT model under scrutiny. The increased requirement for remote working and monitoring of production, assets and processes has accelerated some initiatives such as digitalization and digital transformation. 

Even as the industry recovers from the pandemic, the sector is still faced with significant challenges:

  • Geopolitical Tension
  • Reduced or declining sales volume in most markets
  • Regulatory constraints, particularly related to environmental concerns
  • Skilled worker shortages
  • Supply chain disruptions/tariffs
  • Trade barriers
  • Disruptive technologies and new entrants
  • Difficulty meeting global demand for EVs

Some of these challenges have been caused by internal factors such as production overcapacity, product recalls and brand damage as the result of emission testing failures. Others are a consequence of measures put in place during the pandemic.

The underlying trends that will drive growth over the coming years include:

  • Changes in consumer preferences and ownership models 
  • Connected, Autonomous, Shared, Electric (CASE) 
  • Digital transformation 
  • Growth of artificial intelligence 
  • Mobility services 
  • Software Defined Vehicles (SDVs) 

For more in-depth information about the Automotive industry, check out our e-learning course and Industry Insights platform.

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Objectives

  • Identify the industry terminology
  • Identify the relationships between typical companies in the industry and understand the structure of a typical business
  • Pick out some of the major issues faced by companies in today’s industry
  • Differentiate between the initiatives they take to respond to business issues

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Automotive Industry Related Professions

Analysis of the employment data highlights key geographical disparities in the make-up of the workforce. APAC has the largest number of workers, which is logical given their larger populations, followed by EMEA, then AMER. However, EMEA and AMER have a higher proportion of senior workers, whereas APAC primarily contains ‘lower skilled’ shop floor workers.

At the sub-industry level, the occupation breakdown changes. The Mfg of Motor Vehicles sees a much more even number of workers between EMEA and APAC, though the distribution of skilled versus unskilled workers remains tilted in favor of EMEA. Despite having less workers EMEA invests more in software to improve operational efficiency, this is reflected in the superior VA in this sub-industry.

As the amount of in-vehicle software continues to grow the industry must find ways to attract and retain software engineering talent. This transition reflects a seismic shift in the industry’s employment landscape, where traditional mechanical engineering expertise must now harmonize with cutting-edge software talent. The sector now finds itself in direct competition with the tech industry. The next decade will likely see a shift of software workers transitioning to the automotive industry.

Data from the Cambashi Employment Observatory shows that world-wide there are 8x the number of managers and skilled trades people compared with architects, engineers and technicians. This represents a significant opportunity not only for Aerospace software vendors but also for businesses looking for further efficiencies as part of digital transformation.

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Software Market in the Automotive Industry

Manufacturing technology has grown exponentially over the past two decades, as various industry sectors have adopted methods aimed at reducing material and labor costs, whilst increasing productivity, efficiency, and quality. The automotive industry’s spend on software has grown by ~$900m between 2020–2024.

The pandemic led to a reduction in spending on technical manufacturing software in the automotive industry due to several interrelated factors. The pandemic induced economic uncertainties and disrupted supply chains, causing automotive companies to prioritize cost-saving measures and defer non-essential expenditures, including investments in software technologies. Widespread production halts and reduced consumer demand during lockdowns decreased the immediate need for advanced manufacturing software, as companies focused on managing existing operations rather than expanding or upgrading technological capabilities. Additionally, the shift towards remote work and limited on-site operations posed challenges in implementing and utilizing new software solutions effectively, further dampening investment enthusiasm.

The rebound in spending on technical software in 2021 was likely the result of the industry recovering from pandemic-related disruptions. Companies may have prioritized investments in technology to catch up with postponed projects, to adapt to new market conditions, and to increase their own operational efficiency amid tight financial conditions.

The decline in spending in 2022 could be part of a natural cyclical downturn in investment after a period of recovery. However, tough economic conditions may also be responsible for the subsequent dip in spending. Macroeconomic factors, such as changes in interest rates, inflation, or trade policies, can also influence overall industry spending.

The automotive industry develops and incorporates some of the most advanced technologies of any manufacturing sector. These technologies cover not only vehicle development but also production and supply.
It is easy to recognize the advances in mechanical technologies used in vehicles, which have led to safety, efficiency, and comfort improvements over many years, but manufacturing processes, production facilities, and increasingly software and electronics are also fundamental to the delivery of such a complex product.
Factory automation, the use of robots, flexible production lines, just-in-time production systems, and quality management are core technologies essential to manufacturing performance. The industry has also been instrumental in advancing information technologies which support business processes across the value network, including Resource Planning (ERP), Supply Chain Management (SCM), and Lifecycle Management (PLM).

Here we can see the relative sizes of the Computer-Aided Technologies (Mechanical CAD, Mechanical CAE, CAM) and PLM software sectors in the global automotive market. The total is worth approximately $US3.4 billion annually. Note how MCAE is bigger than MCAD, which highlights the importance of engineering analysis and simulation in the automotive sector.

Learn more about Cambashi Market Data

Design/Engineering/Manufacturing Software Market Share – Automotive Industry

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CAE Automotive Industry Trend: Revenue and Growth

The automotive industry has been impacted on multiple fronts during the COVID-19 pandemic, with a sharp reduction in consumer demand as well as manufacturing impacts due to ‘lockdown’ and social distancing measures. As a result, many of the key simulation software vendors reported falls in revenue in the early quarters of 2020. CAE software vendors…

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