AI puts further pressure on the European automotive industry
PwC study: AI adoption more important than electrification for the European automotive industry
Brussels, 27 October 2026 – The automotive industry expects the implementation of artificial intelligence to deliver greater progress than battery and electric powertrain technologies. By 2030, the use of AI and other advanced technologies in the automotive value chain is expected to rise from 47% to 72%. For European car manufacturers, the challenge is not only to embrace new technologies, but also to maintain their competitiveness in a world where software, data and digital platforms account for an ever-growing share of value creation. “AI is redefining how cars are designed, built, driven and experienced. For Europe’s automotive industry, the greatest risk is failing to innovate quickly enough to remain competitive,” says Tom Vermeir, Partner at PwC Belgium.
AI becomes more important than electrification
For European automotive companies, the focus is increasingly shifting from hardware to software. Globally, 51% of executives consider artificial intelligence one of the most important technologies for achieving their strategic objectives. For the first time, this puts AI ahead of battery and electric powertrain technologies (41%). In Germany, one of Europe’s most important automotive markets, the figure rises to 54%, while 85% of respondents consider software engineering and AI capabilities crucial to future performance.
The competitiveness of European car manufacturers will increasingly depend on their ability to integrate software, data and artificial intelligence successfully. After all, the car of tomorrow will be defined not only by what is under the bonnet, but increasingly by software and digital services.
The increasing digitalisation of vehicles also raises questions about the position of European car manufacturers. As a greater share of value shifts towards software, data and AI, it will be important not only to adopt technology, but also to retain control over technology, data and intellectual property.
New players and ecosystems are reshaping the competitive landscape
Alongside technological change, the competitive landscape is also evolving. Globally, 46% of respondents see new players from adjacent sectors as a major source of competition over the next five years. In Germany, 44% expect this development to have a significant impact on the market.
To adapt to this new reality, more and more automotive companies are pursuing collaboration within broader ecosystems. Almost two-thirds (64%) expect to participate actively in such ecosystems in the coming years. For European manufacturers, collaboration on software, connectivity and data can accelerate innovation and create new growth opportunities. At the same time, such collaboration requires clear strategic choices. As AI, cloud technology, chips and digital platforms become more central to vehicles, the question arises as to which capabilities European automotive companies should build themselves, where collaboration is needed and in which areas dependence on, for example, US and Asian technology companies could create risks.
“The debate today is no longer only about where a car is built, but also about who develops and controls the technology behind it. As software, data and AI account for a greater share of value creation, technological sovereignty is becoming a strategic competitive issue for the European automotive industry. The question is not only how quickly European car manufacturers can innovate, but also how they can maintain their distinctiveness in an increasingly digital value chain,” says Gerd Speed, Automotive expert at PwC Belgium.
The future of the automotive industry is about more than electric vehicles
The shift towards electric vehicles remains an important trend. Globally, companies expect the share of battery-electric vehicles in production to rise from 18% today to 30% by 2030. In Germany, this share is expected to increase from 15% to 29%. At the same time, globally the share of vehicles with a conventional internal combustion engine is set to fall from 60% to 41%.
Future growth, however, will not come solely from new powertrain technologies. Automotive companies are also increasingly looking to new customer segments and sources of revenue. Today, an average of 21% of revenue comes from new customers; within five years, this is expected to rise to 33%. New target groups include commercial fleet operators, mobility service providers and public authorities.
This development shows that car manufacturers are increasingly positioning themselves not solely as vehicle manufacturers, but as providers of broader mobility solutions. The future competitiveness of European automotive manufacturers will thus depend not only on their ability to build high-quality vehicles, but also on the extent to which they can shape the digital services and mobility experiences surrounding those vehicles. In other words, the question of why consumers and businesses should choose a European car will increasingly be answered by more than the vehicle itself.
Skills shortages risk slowing transformation
Although companies are investing heavily in technology, talent remains a significant challenge. Globally, 51% of respondents cite talent shortages as a major constraint on value creation, while 45% point to existing gaps in workforce skills. Software development, AI expertise and digital capabilities in particular appear to lag behind what companies need to remain competitive.
“Sustainable success in the automotive sector will depend not only on technological investment, but also on the ability to attract, develop and retain new skills,” says Tom Vermeir, Partner at PwC Belgium.
Tom Vermeir
Gerd Speed
About the study
PwC’s Global Automotive Outlook 2026 is based on a survey of 720 automotive executives across 33 countries and regions. The study explores the key trends, opportunities and challenges facing the sector over the next five years.
About PwC
At PwC, we help clients build trust and reinvent so they can turn complexity into competitive advantage. We’re a tech-forward, people-empowered network with more than 360,000 people in more than 130 countries and territories. Across audit and assurance, tax and legal, deals and consulting we help build, accelerate and sustain momentum. Find out more about us on www.pwc.com/be.
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