2025: SDV And Automotive Trends to Watch

Technology continues to race onto the automotive scene—and as 2025 and CES begin, many are asking a plethora of questions. Perhaps the biggest heading into CES 2025: How will the technologies and conversations seen and heard shape the automotive space in the year ahead? It’s that very question that has me pondering and eagerly taking a closer look at the automotive industry and what people will be discovering at CES and the rest of 2025.

For starters, the automotive space at CES has evolved since its early beginnings—moving from a pure auto focus to a greater range that includes industrial equipment, marine technology, connected vehicles, and heavy construction machinery, just to name a few. In 2024, we saw more than 18,000 industry attendees listed vehicle technology as an interest. But this is really just the beginning. In 2025, there are a few big trends to continue to watch. Let’s consider a few trends.

The Rise of SDVs

We have been talking about SDVs (software-defined vehicles) for a while now, but the trend is continuing to pick up momentum and it is something we are likely to hear and see in spades at CES 2025.

Global Market Insights suggests the global software-defined vehicle market size was valued at $49.3 billion in 2024 and is estimated to see a growth rate of 25.2% between 2025 and 2034. This is due to a few factors such as the rise of advanced safety features.

The Market for Digital Services

One of the biggest trends to note is the move to digitally enabled services in automotive. Accenture estimated in 2023 that the transition toward vehicles that are defined by their digital services—think safety, comfort, operational, and entertainment features—will bring new revenue to the automotive industry, to the toon of $3.5 trillion in additional revenue in the next two decades.

This sentiment is echoed in Gartner’s 2024 Digital Automaker Index, which compares 22 automakers on their potential to fully monetize software. The general arch of progress we see reflected in Gartner’s index is in the economic opportunity to evolve vehicles more quickly, but also open pathways for new revenue growth.

This is precisely the conversation I was having with John Reed, global solutions leader for manufacturing and mobility industries, Microsoft, recently.

“The overall direction of growth in the industry is toward digital services and that provides the opportunity for manufacturers to grow in new areas, in a different margin profile, while at the same time managing their core automotive business and dealing with some of the competitive pressures that we see yielding a desire to, among other things, reduce the overall engineering and product development timeline,” he says.

Merging the Digital and the Physical

During my exchange with Reed, we talked about how it is becoming more critical to merge digital development with the traditional mechanical and materials engineering processes. This is a key area of focus for Microsoft.

Ultimately, this will help reduce the amount of time necessary to design and engineer new vehicles, while also improving quality and managing the complexity of introducing digital assets into the software-defined vehicle.

Certainly, there are several different ways to do this—and AI (artificial intelligence) will have a significant impact. As an example, Microsoft is working with car manufacturers and suppliers to use generative AI to help with requirements management, along with compliance in the vehicle-development processes, which helps create great efficiency.

New, Impressive Case Studies

Another trend to watch in 2025—and something we can expect at CES 2025—is the rise of impressive stories from manufacturers of how they are leveraging automotive technology. In my conversation with Reed on The Peggy Smedley Show, we talk about a few of these including:

• How Microsoft, PTC, and Volkswagen are working together to introduce into the engineering processes a way of managing the software development lifecycle.
• An immersive experience in the vehicle with Mercedes.
• How Toyota is creating a set of gen AI agents that store internal expertise with a goal of developing new vehicle models faster.

You can hear the full interview here. All of this points to a very interesting trend to note. Use cases often fall into one of three buckets.

• Buy a packaged solution from Microsoft.
• Build your own AI assets and agents.
• Buy a packaged solution from a Microsoft partner like PTC.

Certainly, the case for automotive is huge in 2025. We can anticipate seeing SDVs and gen AI continuing to speed up on the scene, as businesses continues to rev up tech adoption. Are you just as curious about the new automotive entrants and how they will impact the automotive industry in the new year?

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