The automotive industry is undergoing a technological transformation. And this means much more than just the shift from combustion engines to electric vehicles: Cars are evolving from traditional means of transportation to digital lifestyle products on wheels. A recent report from Research and Markets shows that “Connected Cars” are ushering in a new era of mobility.
Connected vehicles are cars equipped with digital technologies that communicate not only with the driver, but also with their environment and other services. The technological foundation consists of the so-called connectivity types:
- Smartphone-based: The vehicle utilizes the connectivity of the smartphone.
- Tethered: Connection via cable or adapter.
- Embedded: Built-in SIM cards or modules that communicate directly with the internet.
What drives this development?
New technologies such as smartphones and cloud services bring the car digitally into the living room. Instead of classic driving, there will increasingly be AI-based assistants, entertainment and personalized experiences. Partnerships with tech companies are crucial, such as between BMW and AirConsole for gaming or Volvo and Dolby for premium sound.
The automotive industry is searching for new ideas beyond the traditional vehicle. Automakers are increasingly partnering with IT, entertainment, and gaming companies. Especially software-defined vehicles and digital cockpits with advanced displays are creating new competition dynamics.
The focus is shifting from selling cars to digital services and subscription models. Whether consumers will embrace subscription models for additional features remains to be seen. Nonetheless, automakers continue to invest in partnerships with software and cloud providers to open up new business areas around digital services, artificial intelligence and data-driven solutions.
The ten most important trends in the automotive industry for 2025
- Expansion of 5G networks: 5G stands for “Fifth Generation” and is the latest generation of mobile technology. It provides fast, stable internet connections – the foundation for all modern in-car services.
- Advanced HMI: “Human-Machine Interface” refers to the interface between human and machine. Voice assistants like Alexa, large touchscreens, HD maps and the integration of Augmented Reality (expanding reality with digital information) and Virtual Reality (virtual reality) give drivers a completely new experience.
- Media streaming in vehicles: Users can stream movies, series and music directly in the car.
- Artificial Intelligence (AI): AI personalizes vehicle functions and adjusts music, navigation or climate to personal preferences.
- In-car commerce: Payments and bookings can be made directly from the vehicle—whether for snacks, charging, or software updates.
- Gaming in vehicles: Cooperation projects such as BMW-AirConsole enable passengers to play video games while driving.
- Connected safety (Road Safety): “Vehicle-to-Everything” communication (V2X), i.e. the exchange of data between cars, infrastructure and other road users, aims to increase safety.
- Innovations in the insurance sector (Insurtech): New technologies enable better, individualized insurance solutions.
- Software-defined vehicles (SDV): A “Software-defined Vehicle” is a car in which many functions—such as engine control or entertainment—are managed and updated by software. Updates can be made “over-the-air” (OTA), i.e. wirelessly, as with smartphones.
- Automotive App Stores: As with smartphones, users can download new apps and services for their vehicles.
The ten key forecasts for the year underline: Personalized experiences through artificial intelligence, new entertainment offerings and higher safety standards through V2X communication are expected to shape the market according to the newly published study. In the future, cars will no longer be just hardware—they will be digital platforms that continually evolve, opening new opportunities in value creation for manufacturers and suppliers alike.
Source: Connected Vehicle Market Growth Outlook, 2025. Research and Markets
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