The Software Race Transforming Europe’s Cars

EU automakers align on open software ecosystems for SDVs, unlocking OTA innovation while advancing digital sovereignty goals.

30 Oct 2025

Europe’s automotive industry is reshaping how vehicles are built as manufacturers and suppliers align around shared software platforms for the next generation of cars.

Through the European Connected and Autonomous Vehicle Alliance, companies are working on common software architecture designed to support “software defined vehicles”, or SDVs. The initiative, supported by the European Commission, aims to lower development costs and speed up innovation while strengthening Europe’s position against technology-led rivals in the US and Asia.

Software defined vehicles rely on centralised computing systems and cloud connectivity rather than the fragmented electronic systems that have traditionally powered cars. European groups are increasingly collaborating on basic software layers that can run across multiple brands and models.

Industry executives describe the shift as a fundamental change in vehicle engineering. Cloud-enabled platforms allow manufacturers to deliver digital services, offer features on demand and update systems continuously after vehicles leave the factory.

The approach turns cars into evolving products rather than fixed hardware. Over-the-air updates allow companies to fix software faults remotely and add new functions during a vehicle’s life. Analysts say this could reduce costly recalls, shorten development cycles and create recurring revenue through subscription services.

Software is already becoming a larger share of a vehicle’s overall value, particularly in premium segments, and its role is expected to expand further as cars become more connected and autonomous.

The alliance also reflects a strategic shift in how European manufacturers compete. By pooling resources around non-differentiating software components and adopting open ecosystems, companies aim to reduce duplication while focusing on brand-specific user experiences.

The effort also aligns with broader EU policy goals around digital sovereignty. Policymakers have sought to strengthen Europe’s control over critical technologies, including data infrastructure and software platforms.

Challenges remain. Automakers must manage large volumes of vehicle data while complying with the EU’s General Data Protection Regulation. Cybersecurity risks and reliance on global cloud providers also require careful governance and continued investment.

Even so, the industry’s direction is becoming clearer. As vehicles become increasingly defined by software, shared platforms and cloud connectivity are emerging as central elements of Europe’s automotive strategy.