Europe’s Automakers Reboot the Car With Software

European automakers accelerate software-defined vehicle platforms to cut costs, manage complexity, and compete with tech giants in a digital-first era

7 Jan 2026

Europe’s carmakers are accelerating efforts to develop software-defined vehicles (SDVs), as rising engineering costs and new digital regulations push the industry towards more centralised and scalable vehicle software systems.

The shift reflects a broader change in how cars are designed and maintained. Software is becoming a core component of vehicle development, enabling features such as over-the-air updates, connected services and automated driving. As these capabilities expand, manufacturers are seeking to simplify underlying software architectures to reduce duplication across vehicle models.

At the CES technology show in 2026, automotive software group Elektrobit introduced what it described as a “right-sized” platform aimed at lowering the cost of deploying advanced digital functions. The system is designed to allow manufacturers to reuse software components across multiple vehicle programmes while limiting the complexity that has emerged as vehicles incorporate more digital features.

Industry analysts say software now represents a growing share of vehicle development expenditure. In advanced programmes it can account for roughly a third of total development costs, reflecting the engineering effort required to build and maintain increasingly complex code bases.

Technology companies are also playing a larger role in the transition. Chipmaker Qualcomm is working with several global automakers on centralised computing platforms that combine many electronic control units into fewer high-performance systems. The approach forms part of a broader move towards “zonal” vehicle architectures, where computing resources are concentrated rather than distributed across dozens of separate modules.

Cloud providers including Microsoft and Google are expanding partnerships with automotive groups to support virtual testing environments, data management and continuous software deployment. These collaborations are reshaping how vehicles are designed, tested and updated throughout their operating life.

Regulation is another factor accelerating change. European Union initiatives focused on digitalisation and cybersecurity, alongside evolving United Nations Economic Commission for Europe (UNECE) rules on software updates and vehicle cyber resilience, are pushing manufacturers towards more standardised and secure software frameworks.

Together, these developments are altering the basis of competition in the automotive sector. Carmakers are increasingly judged not only on hardware performance but also on the strength and adaptability of their software platforms as vehicles become more connected and autonomous.