The rise of Software-Defined Vehicles (SDV) is reshaping how vehicles are designed, updated, monetised, and experienced by customers. It’s a key factor in the automotive industry entering a decisive phase of transformation, where the competitive edge is increasingly shifting from mechanical engineering alone to software capability, connectivity, and data-driven services.
For manufacturers, the transition is not simply about adding more digital features. Instead, it signals a broader evolution towards tech company-style operating models, where over-the-air (OTA) updates, remote services, connected ecosystems, cybersecurity, and continuous feature deployment are central to product strategy.
This analysis examines SDV adoption trends between 2021 and the first half of 2026 across 45 automotive markets*.
Analysis of several SDV-related JATO indicators shows significant improvement across all six measures between 2021 and H1 2026. Among them, OTA updates show the largest increase, rising by approximately 34% in that time. Remote services – which includes functions such as remote lock/unlock, vehicle status monitoring, and smartphone-based vehicle management – demonstrate the second-fastest growth and now stand at a global penetration rate of 76% in H1 2026.
The rise in SDV feature adoption has occurred alongside the expansion of BEVs. Across the 45 countries analysed, the BEV share more than doubled, increasing from 6% in 2021 to 17% in H1 2026.
When analysed by powertrain type, these indicators appear to be strongly linked. Remote services are now almost a standard feature for BEVs worldwide. As of H1 2026, they feature in 96% for BEVs, compared with 63% for ICE vehicles.
A similar trend can be observed for OTA functionality. While OTA penetration among ICE vehicles has expanded to approximately 49%, it reaches nearly 90% when focusing exclusively on BEVs.
While BEV adoption appears closely linked to SDV penetration, substantial differences remain across countries. Focusing on the five largest automotive markets provides additional insight into how local market dynamics influence adoption patterns.
China – setting the SDV benchmark
China leads among the major markets examined for SDV integration, which may reflect the country's highly competitive automotive ecosystem, where both traditional automakers and technology companies are actively participating in software and mobility development.
United States vs. Germany – different paths to SDV adoption
The United States and Germany are competing closely in this area, with similar uptake in each of the six SDV indicators. However, compared to Germany, the United States has seen faster SDV adoption, which is influenced by factors such as market dynamics, regulatory environments, and varying approaches to connected vehicle deployment. For example, companies such as Tesla have played an influential role, leveraging strong software capabilities and helping accelerate industry-wide adoption.
Although the BEV penetration rate in the United States remains relatively modest at 5.6% in H1 2026, SDV-related features have nevertheless become increasingly widespread. In-vehicle Wi-Fi is common not only among domestic OEMs but also across many foreign brands operating in the market, reflecting OEM feature strategies in the U.S. market. Notably, the United States demonstrates that strong SDV adoption can emerge even in a market with relatively low BEV penetration.
India and Japan – contrasting SDV development routes
India is ahead of Japan in OTA deployment; however, it significantly lags in in-vehicle Wi-Fi penetration, which stands around 3%. This contrast highlights the extent to which SDV feature adoption can be influenced by underlying infrastructure and market conditions.
Japan, meanwhile, exhibits lower SDV-related saturation. One likely factor is the country's comparatively low BEV adoption rate, which stood below 3% in H1 2026. In addition, the unique composition of the Japanese market also influences SDV adoption.
Kei cars, for example, accounted for 32% of total sales in H1 2026 and, given their focus on affordability and practicality, advanced connected features are often less widely deployed in this vehicle category. Remote services integration stands at just 18% among kei cars, compared with 72% for SUVs.
SDV-related features have become increasingly mainstream between 2021 and H1 2026. While higher feature penetration is strongly associated with BEV adoption, the relationship also reflects broader factors such as newer vehicle architectures, OEM software strategies, and increased investment in connected technologies. Country-level comparisons suggest that SDV adoption is shaped by four primary factors:
As a result, the pace of SDV transition continues to vary considerably across regions despite a common global trend toward software-enabled mobility.
While adoption rates continue to rise globally, the next stage of SDV evolution is expected to be defined not only by feature deployment but also by how OEMs create value from software ecosystems. Over the next three to five years, several trends are expected to shape the competitive landscape:
As a result, competitive differentiation may increasingly depend on an OEM's ability to continuously develop, deploy, and manage software throughout the vehicle lifecycle.
For vehicle manufacturers, this marks a strategic turning point. Success in the SDV era will require capabilities or partnerships that extend beyond traditional vehicle manufacturing. Requirements include software development, data monetisation, cybersecurity, cloud integration, user experience design, and continuous product improvement after the point of sale.
As vehicles become increasingly defined by digital functionality, automakers that can combine engineering scale with technology-company agility will be best positioned to capture future growth in the evolving mobility ecosystem.
The findings suggest that competitive intensity, software capability, and ecosystem maturity may increasingly become as important as powertrain strategy in determining future automotive competitiveness.
While electrification remains closely associated with SDV adoption, the experience of markets such as the United States demonstrates that software leadership can emerge through multiple strategic pathways. For OEMs, the challenge is no longer whether to invest in software capabilities, but how quickly they can translate those capabilities into sustainable competitive advantage. The next phase of competition will increasingly depend not only on software deployment but also on the ability to monetise software-enabled services throughout the vehicle lifecycle.
* Markets analysed in this report are as follows:
Japan, Malaysia, New Zealand, Taiwan, Thailand, Vietnam, Australia, Indonesia, Korea, Philippines, China, India, Austria, Belgium, Croatia, Czech Republic, Denmark, Finland, France, Germany, Great Britain, Greece, Hungary, Ireland, Israel, Italy, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, The Netherlands, Turkey, Canada, Mexico, USA, Argentina, Brazil, Chile, Russian Federation, South Africa