The Road Ahead: How AI-Powered, Software-Defined Vehicles Are Transforming India’s Auto Industry

India’s auto industry is poised on the edge of a tectonic shift. Previously driven by mechanical horsepower alone, cars are now being conceived as smart, connected cars. The world is hurtling towards software-defined, artificial intelligence-driven cars (SDVs). It is not merely a technology revolution. It is a total rewiring of the industry’s DNA. For Indian OEMs, the transformation is a challenge and an opportunity of unprecedented scale.

From hardware to code: The Software-Defined Vehicle (SDV) era

Conventional cars have long been using distributed electronic control units (ECUs) that control disparate functions. However, SDVs are shifting the architecture from dispersed hardware to centralised computation. In this case, most of the abilities—ranging from infotainment and ADAS (Advanced Driver-Assistance Systems) to predictive maintenance—are defined and constant updates are delivered through software.

The prevalence of software will soon be so inherent that within a span of five years, we can expect it to become as much as half of the total cost of vehicle development. 

Why this transition is important to Indian OEMs

Despite being a big automobile market, India’s automotive industry has been historically hardware focused. Although leading automotive OEMs have made considerable progress with electric mobility, they are still a long way off from becoming outright software-first companies.

However, this situation is likely to change soon owing to several factors. One will be the trend of AI as an intrinsic part of global automotive scene making its way to India. AI is leveraged significantly for elevated driver assistance, route optimisation in real time, and voice-activated assistants. 

Another is the growing preference of local customers for rich digital experience, personalised products, multi-platform connectivity and enhanced safety, which can only be delivered through software. Also, revenue models in the auto industry are evolving. The one-time sale of vehicles is being augmented by repeat revenues from software subscriptions, upgrades, and connected services.

The emergence of intelligence on wheels with AI

AI plays a central role in enabling the vehicle to adjust to uncertain environments, provide personalised in-car experiences, and sustain high-quality software performance at scale. For India, this is particularly pertinent given unreliable road conditions and unpredictable traffic. AI not only makes features such as adaptive cruise control and lane assist possible but also helps in training models for Indian road conditions. 

The path forward for Indian OEMs is clear. OEMs must recast automobile design ground up as a union of software and hardware. This means investing in centralised electronic architectures, over-the-air (OTA) update platforms, and scalable development platforms.

The industry also requires a talent overhaul. OEMs need software architects, data scientists, DevOps engineers, and AI/ML specialists—roles not traditionally a part of core auto manufacturing. In addition, automotive companies must adopt open ecosystems, such as hyperscalers, AI partners, and mobility startups.

With software comes risk. SDVs require strong cybersecurity protocols. To this end, India’s imposition of Bharat NCAP and promotion of telematics and compliance frameworks indicate stricter operational regulation.

The Strategic Opportunity for India

India possesses a distinct advantage: a huge consumer market, robust IT infrastructure, and rapidly expanding EV infrastructure. Initiatives from the government like the PLI scheme for auto and auto component industries can advance local manufacturing. By focusing on developing AI models locally, cost-effective production strategies, and digital-first approach, Indian automakers can overtake their global peers. It’s not imitation of the West – it’s about creating an India-first mobility narrative that is smart and secure.

Software-defined, AI-driven cars are no longer a vision of the future—they’re already on the road and picking up steam. For Indian OEMs, the future will be written in terms of their capacity to change gears—literally and figuratively—from manufacturing cars to building smart mobility platforms. Those who redefine themselves early as not merely car makers, but technology-driven mobility enablers, won’t merely weather the disruption—they will propel it.

Biswajit Bhattacharya is a Lead Client Partner & Automotive Industry Leader at IBM Consulting India & South Asia. Views expressed are the author’s personal.

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