New Technologies Are Putting the Car Industry to the Test

The global automotive industry stands at a pivotal moment. After decades of relative stability, the sector is facing an unprecedented convergence of disruptive forces: artificial intelligence, software-defined vehicles, shifting consumer expectations, and geopolitical fragmentation. According to KPMG's 25th Annual Global Automotive Executive Survey, which captured the perspectives of 775 senior executives across OEMs, suppliers, dealerships, and mobility services, the industry is no longer merely evolving; it is being fundamentally redefined.

Yet despite the urgency, a striking disconnect has emerged. While 86% of OEMs are investing heavily in artificial intelligence and emerging technologies, only 20% of executives feel prepared to manage the disruption these technologies will bring. This readiness gap represents one of the greatest risks facing the industry today.

The Five Ts of Transformation

KPMG's analysis identified a small cohort of high-performing companies—representing the top 15% of respondents—that are not only navigating change but leveraging it. These leaders are outperforming peers in innovation, customer satisfaction, and operational efficiency.

Their success is anchored in five strategic imperatives, known as the "Five Ts of Transformation":

Spearhead Transformation: Leading companies focus on value over volume, with 71% expecting complete business model transformation within three years, compared to the industry average of 36%.

Master Technology: While maintaining strategic control over critical systems, top performers are twice as likely to say technological breakthroughs will drive business growth (42% versus 20%).

Earn Trust: Leading companies prioritize product quality and customer satisfaction at significantly higher rates, with 63% focusing on product and service quality compared to 15% of other companies.

Navigate Tensions: Successful organizations demonstrate superior supply chain resilience, with 81% actively restructuring their operations to address geopolitical and economic pressures.

Thrive Together: Strategic partnerships are crucial, with 77% of companies stating that alliances are important to business growth, rising to 96% among companies highly prepared for supply chain transformation.

The AI and Software-Defined Vehicle Revolution

Perhaps no force is reshaping the industry more profoundly than the rise of software-defined vehicles (SDVs). Executives expect autonomous driving to become standard across vehicle types by 2030, with 87% of respondents anticipating this shift.

However, SDVs introduce new vulnerabilities, particularly cybersecurity threats and data risks. These concerns are especially pronounced in the EMEA region, where 71% of executives cite them as major concerns, compared to 64% in the Americas and 54% in ASPAC. As digital complexity grows, companies must make strategic decisions about which technologies to own, co-develop, or outsource, particularly those tied to safety and customer trust.

The Customer Experience Gap

Despite the strategic importance of customer satisfaction, only 16% of all executives identify it as critical to long-term profitability. Most continue to focus on productivity as the primary driver of performance. In contrast, leading companies are setting a different benchmark: 48% rank customer satisfaction as a top strategic priority, compared to just 10% among their peers.

Fragmented digital experiences are eroding customer engagement. A third of executives acknowledge that the shift to digital sales has made it more difficult to build meaningful customer relationships, a challenge especially pronounced in the electric vehicle market, where affordability and infrastructure limitations are slowing adoption.

Supply Chain Resilience Under Pressure

Geopolitical fragmentation remains one of the most disruptive forces impacting the automotive industry. Rising volatility, excess capacity, and diverging regulatory frameworks are compelling companies to reassess their sourcing, production, and go-to-market strategies.

In response, 68% of companies are actively restructuring their supply chains through nearshoring, friendshoring, and local-for-local models. These strategic shifts are delivering measurable results: 94% of companies that consider themselves well-prepared for supply chain disruption report outperforming profit targets, compared to just 45% of those less prepared.

Profitability Concerns Deepen

The economic outlook has darkened. Only 34% of executives worldwide are confident that profits will increase over the next five years, down from 41% in the previous year. In Germany, corporate decision-makers are even more pessimistic, with just 16% expecting profits to increase.

At the same time, the industry is undergoing a significant realignment. Almost 70% of executives anticipate that traditional OEMs will regain their strength, yet an equal proportion expects new market entrants to emerge as dominant players. This near-even split underscores the profound uncertainty about who will shape the industry's future.

The automotive industry is navigating one of the most volatile periods in its history. Technological disruption, geopolitical tensions, and shifting consumer expectations are rewriting the rules of the road. Companies that can orchestrate transformation across multiple domains, such as technology, supply chains, customer experience, and business models, will emerge as the leaders of the next decade.

As Dr. Andreas Ries, Global Head of Automotive at KPMG International, puts it: "The companies that succeed over the next decade will not be the biggest, the fastest, or even the most technically advanced. They will be the ones that are most aligned with the realities of a radically transformed industry".

The race is on. And only the most adaptable will survive.