This blog is based on a recent analysis, “Automotive Production Trends and Insights, Global, 2025–2030,” authored by Dorothy Amy, Frost & Sullivan’s Mobility Growth Expert.
Executive Summary:
The connected vehicle industry is moving beyond infotainment and telematics hardware. Software, data, connectivity, and cross-industry partnerships are increasingly becoming the primary sources of new value. Ten strategic imperatives are shaping the next areas of growth, including 5G-based vehicle-to-everything (V2X) rollouts, subscription-led business models, semiconductor trade restrictions, and telematics control unit (TCU) supplier consolidation.
KEY TAKEAWAYS
- The connected mobility ecosystem is expanding beyond automakers, pulling telecom, cloud, and semiconductor players into shared vehicle platforms.
- Subscription and features-on-demand models are becoming the default path to recurring revenue, with Tesla ending one-time full self-driving purchases in February 2026.
- Established TCU suppliers hold leading positions in a still-fragmented supplier base, raising competitive intensity for smaller and regional players.
- Trade restrictions on semiconductors and connectivity components are forcing OEMs to rebuild sourcing strategies around resilience, not just cost.
What Is the Connected Vehicle Industry?
The connected vehicle industry includes the hardware, software, and network infrastructure that enable a vehicle to exchange data with the cloud, other vehicles, road infrastructure, and connected devices. It covers telematics control units, V2X modules, over-the-air (OTA) update platforms, in-cabin connectivity, and the data and subscription services built on them. The industry began as a hardware category centered on subscriber identity module (SIM) cards and global positioning system (GPS) chips. It is now software-led, with the vehicle operating less like a fixed product and more like a digital platform that is updated continuously.
Why Connected Vehicle Industry Is Entering a Pivotal Stretch
Every new vehicle platform adds computing power, sensors, and connectivity modules. At the same time, regulators are introducing new rules for cybersecurity, data handling, and software updates. For executives leading connectivity, telematics, or mobility software businesses, the result is a fragmented market. Growth is real and accelerating, but companies must also manage the complexity of multiple regions, technology stacks, and monetization models.
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Frost & Sullivan Perspective According to Frost & Sullivan, the connected vehicle industry’s focus is shifting from connectivity as a feature to connectivity as an operating model. Companies that treat data, software, and partnerships as core business lines—not support functions—are likely to capture the most growth. |
Top 10 Strategic Imperatives Shaping the Connected Vehicle Industry
- Industry Convergence: Telecom operators, semiconductor makers, cloud providers, and software firms are coming together in one connected mobility ecosystem. Vehicles, roadside infrastructure, and digital services increasingly use shared platforms instead of separate automotive systems.
- Innovative Business Models: Mobility-as-a-Service (MaaS) platforms combine trip planning, ticketing, and payment in one app, but the commercial model is still evolving. Whim, a pioneering MaaS subscription app, entered bankruptcy in 2024. Its successor, umob, now operates a pay-per-ride model across 28+ countries and 300+ cities.
- Disruptive Technologies: Cellular V2X is advancing through successive 3rd Generation Partnership Project (3GPP) releases. Upgrades to 5th Generation New Radio (5G NR) V2X architecture aim to reduce latency and support more use cases than the original long-term evolution (LTE) Cellular-V2X baseline. Chipset and module suppliers must therefore update their roadmaps faster.
- Transformative Megatrends: The broader shared and connected mobility market is increasing the opportunity for connectivity providers. Automakers, fleet operators, and technology providers continue to invest more in digital mobility.
- Geopolitical Chaos: Trade tensions are now affecting connectivity hardware directly. A 25% US tariff on select advanced computing chips took effect in mid-January 2026. Under the US Bureau of Industry and Security’s connected vehicle rule, software restrictions require new vehicle models sold in the United States to be certified free of Chinese-origin software starting with model year 2027, while the certification requirement extends to hardware and to legacy models without a specific model year by January 1, 2029. These measures are forcing changes in sourcing and validation across the supply chain.
- Competitive Intensity: : Leading suppliers such as LG, Harman, Bosch, Continental, and Denso, hold strong positions in the global telematics control unit space, though the broader supplier base remains wide and increasingly competitive. Smaller and regional suppliers must compete aggressively on price, integration speed, and local support.
- Internal Challenges: As vehicle and infrastructure connectivity grows, many organizations are accumulating cybersecurity and privacy technical debt. Closing this gap is now essential before launching new digital mobility services; it can no longer be treated as a separate workstream.
- Innovative Business Models: Software-defined vehicle (SDV) monetization is moving from pilot programs to formal policy. Tesla ended one-time full self-driving purchases in February 2026 and moved the feature to a monthly subscription. The company also confirmed that pricing will rise as the software capability improves. However, many OEMs are still facing strong consumer resistance to paid subscriptions, and the ones seeing better uptake are the ones bundling features with clear, ongoing value rather than charging for capabilities customers already expect to own.
- Customer Value Chain Compression: Direct-to-consumer (D2C) platforms are simplifying the customer journey for micromobility and ride-hailing. This is pushing legacy OEMs and dealers to reassess how much of the customer relationship they retain after the point of sale (PoS).
- Internal Challenges: Established mobility and telecom organizations still face internal resistance as they shift from one-time hardware sales to recurring, data-driven business models. This cultural friction often slows connected services rollout more than the technology itself.
Concluding Thoughts
The connected vehicle industry will continue to reward companies that combine software monetization, cybersecurity, and sourcing flexibility in one roadmap instead of managing them as separate initiatives. Suppliers that invest early in 5G-ready V2X hardware and subscription-capable software stacks will be better positioned to gain share as OEMs reduce the number of technology partners they use.
Strategic Recommendations for Business Leaders
- Build software and data monetization capabilities now, rather than waiting for hardware margins to compress further.
- Diversify semiconductor and connectivity component sourcing to reduce exposure to tariff and certification risk.
- Close cybersecurity and privacy technical debt before scaling new connected services, not after.
- Track TCU supplier consolidation closely when selecting technology partners for new vehicle platforms.
Frequently Asked Questions
What is driving growth in the connected vehicle industry?
Growth is being driven mainly by expanding vehicle-to-everything (V2X) infrastructure, wider adoption of software-defined vehicles, and rising demand for subscription-based connected services.
Why are software-defined vehicles important to this industry?
Software-defined vehicles (SDVs) shift value from one-time hardware sales to recurring software and data revenue. This changes how OEMs and suppliers plan product roadmaps and set prices.
How is the telematics control unit space structured today?
Leading suppliers such as LG, Harman, Bosch, Continental, and Denso hold strong positions in global telematics control unit (TCU) shipments, but the supplier base remains broad, creating high competitive intensity for new entrants.
What geopolitical risks are affecting connected vehicle supply chains?
US restrictions on Chinese-origin vehicle software and new semiconductor tariffs are changing sourcing decisions for connectivity hardware and chipsets.
Is Mobility-as-a-Service (MaaS) still a viable business model?
Yes, but the pricing model is critical. Subscription-led MaaS platforms have faced commercial challenges, while pay-per-ride models are gaining stronger traction across European cities.
How is V2X technology evolving?
Cellular vehicle-to-everything (V2X) is progressing through newer 3GPP releases, with 5G NR V2X targeting lower latency and broader use cases beyond the original LTE-based standard.
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