Chapter 1 - What Are the Top Market Challenges Impacting Automotive Software Development?

2026 Market Conditions

The global economy and ongoing conflict worldwide continued to be the leading market conditions impacting automotive professionals this year, with both conditions increasing by 6% and 2%, respectively, since 2025.

Automotive tariffs issued by the United States, no doubt have a part to play in the global economy impact on vehicle software in 2026, and many trade agreements between countries remain uncertain. In addition, there have been significant shifts in the global auto market. For example, China is now dominating vehicle production. In the latest statistics from the International Organization of Motor Vehicle Manufacturers, car production was over 21 million compared to ~5 million in Japan, ~4 million in India, ~3 million in Germany and ~1 million in the United States. Not only is China now the largest automotive manufacturer, but it is also the world's largest exporter of vehicles, according to Automotive Manufacturing Solutions. China’s BYD is now the fastest-growing electric vehicle manufacturer, covering nearly 20% of the world’s EV market (per a Counterpoint analysis). This year, China has overtaken Tesla as the largest seller of EVs, with 2.25 million vehicles sold last year, according to the BBC, which may add to the rising trade tensions between the U.S. and China.

Ongoing global conflicts, including the Russia-Ukraine war and the Iran-Israel-U.S. conflict, are also causing disruptions to the automotive industry and supply chains, so it is easy to see why these market conditions remain top-of-mind for survey respondents this year.

Region

The global economy was the most pressing market concern for a majority of respondents across North America, Europe/UK, Asia, and Latin America. From those handful of respondents from the Middle East, a shift to a hybrid workforce made a greater impact, and those few respondents from Africa said that opening new locations and expanding offices was more impactful.

Note that the survey respondents could select all that apply. 

Organization Type

Across the board, the global economy was a top market concern for all types of organizations. The global economy was much more impactful for Tier 1 and Tier 2 suppliers than for other organizations.  

Note that the survey respondents could select all that apply. 

Hybrid Working and Return-to-Office Has Stabilized as the New Norm

Over the past few years, hybrid working has emerged as the work model of choice for organizations and employees. This year, there was a slight increase of 3% in hybrid working, while working mainly in an office decreased by 3% since 2025.  

2026 Leading Market Challenges

Automotive organizations face many competing challenges in 2026. Like last year, respondents were most concerned with “maintaining industry competitiveness” (57%); and, while decreasing by 10% since last year, “maximizing existing resources” was still second choice for leading challenges.

Overall, fewer companies appear content with their current tools and workflows. It is likely that increased design and complexity, along with the emergence of AI, are sounding a wakeup call to modernize or be left behind.

“Modernizing tech stack” increased slightly by 3%, which could indicate the growing need to keep pace with emerging AI technologies. “Mitigating software recalls” also increased slightly by 2%, although still less of a challenge than compliance — however, the decrease in compliance issues over last year may mean organizations have implemented better systems and tools that enforce compliance. Considering that “educating existing talent” also decreased by 4%, teams are likely more confident that they know how to meet compliance standards and can focus on other areas.

Organization Type

While maintaining industry competitiveness was the top concern for each type of automotive organization, Tier 2 and Tier 3 suppliers were more interested in educating existing talent than maximizing existing resources. 

Note that the survey respondents could select all that apply.