Are OEMs losing control of value in the connected car stack - even as they build the vehicles?
- Amit Shukla
- 42 minutes ago
- 5 min read
As vehicles become increasingly software- and connectivity-focused, the automotive industry is undergoing structural shifts. Value is now based more on digital features than on the physical car itself. While automotive brands (OEMs) still own the vehicles, data, services, and customer interactions are increasingly influenced by cloud platforms, software ecosystems, and third-party apps. This change has created a gap.
OEMs generate the data and own the cars, but profit and growth opportunities are moving elsewhere. Control is now spread across a network of different players, where power is shared, challenged, and continuously redefined. To understand if OEMs can maintain their importance, we need to look at where control is strong, where it is weakened, and where value ultimately goes.
From Vertical Control to a 5-Layer Ecosystem View
The traditional automotive value chain was vertically integrated: OEMs controlled design, production, and customer experience end-to-end. That linear model is being replaced by a multi-layered connected-vehicle stack, in which each layer operates under distinct economics and with competing stakeholders.
According to the Connected car stack, high-speed connectivity, embedded compute, and cloud integration have transformed the vehicle into an edge node within a broader digital framework:
Layer 1: Cloud Services – The off-board environment hosting hyperscalers' infrastructure, data platforms, analytics, AI/ML models, developer ecosystems, and vehicle data lakes.
Layer 2: Connectivity & Shared Services (In-Vehicle & Edge) – The communication and data orchestration layer managing connectivity (4G/5G), telematics control units (TCUs), edge data pipelines, and over-the-air (OTA) enablement.
Layer 3: Vehicle Applications – The feature layer including infotainment, navigation, remote services, EV services, and usage-based subscription offerings.
Layer 4: Operating System & Middleware / Virtualization – The software abstraction layer including AUTOSAR, Linux/Android Automotive, hypervisors, middleware, and compute partitioning.
Layer 5: Hardware & E/E Architecture – The physical foundation consisting of ECUs, domain controllers, smart sensors, wireless connectivity modules, and in-vehicle infotainment components.
While OEMs anchor the ecosystem within the Hardware & E/E domains (Layers 4 and 5), value capture is increasingly concentrated in the upper layers—particularly in applications and cloud platforms. Control of the end device no longer guarantees control of value.
Two Critical Vectors of Value Migration
A key challenge for modern automotive strategists is a structural mismatch: data originates at the bottom of the stack, while value is realised at the top. This disconnect creates two reinforcing dynamics:
1. Upward Migration of Value
Raw vehicle telemetry has limited standalone value. It becomes economically meaningful only when aggregated across fleets, analysed using AI/ML models, and converted into actionable services. These capabilities are strongest in cloud platforms and application layers, not in hardware. As a result, margins concentrate upward, while the lower layers remain capital-intensive with structurally lower returns.
2. Horizontalization of the Customer Interface
The in-vehicle experience is shifting into a multi-provider domain. Cabin interfaces are heavily influenced by external mobile ecosystems, third-party application platforms, and voice assistants. OEMs are not losing control of the cockpit entirely, but they are transitioning from total vertical ownership toward a role of strategic ecosystem orchestration.
Strengths vs. Limitations: Mapping OEM Positioning
To understand how this tension plays out, we evaluate where OEMs remain structurally resilient and where they are vulnerable.
Where OEMs Remain Structurally Strong
System Integration as a Core Differentiation (Layers 4 & 5): This remains the OEM’s most defensible anchor. OEMs uniquely control vehicle homologation, functional safety, and multi-domain system integration. No cloud or tech platform player can safely coordinate the interplay among physical chassis dynamics, high-voltage battery management, regulatory constraints, and cloud-connected software at scale.
Control of the Installed Base & Gatekeeping: OEMs directly manage fleets of connected vehicles, offering long lifecycle touchpoints. Furthermore, no ecosystem player can operate in-vehicle services without OEM approval, giving automakers leverage over APIs, data access, and partner integration rules.
Report Insight: The Hardware, E/E and Software Foundation While OEMs lead in system integration, semiconductor firms, Tier-1 suppliers, and OS platform providers play critical technical roles. Rather than holding absolute authority, the OEM's position is one of primary control over integration, with increasing dependence on external partners.
Where OEMs Are Structurally Vulnerable
Applications & Customer Experience (Layer 3): Big Tech and consumer ecosystem players increasingly define user experience (UX) expectations. Smartphone ecosystems extend seamlessly into the cockpit, threatening to structurally confine OEMs, limiting their direct customer engagement and monetisation loops.
Cloud & Data Monetization (Layer 1): Hyperscalers dominate data storage, advanced analytics, and AI. Crucially, tech platforms benefit from cross-industry data aggregation, creating immense data network effects. OEMs that scale strictly within their specific vehicles lack this cross-industry scale.
Report Insight: The Cloud & Feature Stack Sitting at the top of the stack, Cloud Services host data lakes, digital twins, and personalization engines. This layer captures the highest scalability, recurring revenue potential, and cross-industry leverage.
What This Means for Ecosystem Players
The five-layer connected-vehicle stack presents a structural opportunity for ecosystem participants—hyperscalers, telecom providers, software platforms, and app developers—to expand their influence. They can capture significant value by becoming indispensable providers of platforms, analytics, and user-facing services.
However, their success depends on their ability to operate within an OEM-governed environment—integrating seamlessly into vehicle architectures, meeting strict safety and cybersecurity standards, and aligning with OEM-defined APIs and data access rules. In this model, ecosystem players cannot fully displace automakers but must co-exist within a shared digital framework.
Evolving from Ownership to Orchestration
OEMs are not passive participants in this shift. Advanced automakers are protecting their long-term relevance by relying on three core structural strategies:
Selective Presence Across the Stack: Instead of attempting full, capital-intensive ownership of every layer, success would rely on selective participation. OEMs are building proprietary solutions in which they must maintain unique influence (such as edge data pipelines, identity management, and OTA orchestration) while strategically partnering with hyperscalers on cloud infrastructure and developer ecosystems.
Reinforcing the System Integrator Advantage: OEMs are doubling down on their ability to coordinate hardware, software, and services across complex domains over a 10–15-year vehicle lifecycle.
Managing Asymmetric Partnerships: To balance the uneven leverage of tech partners who scale horizontally across multiple industries, advanced OEMs are adopting response strategies centred on multi-cloud architectures, platform abstraction layers, and open standards (such as AUTOSAR) to maintain flexibility and avoid single-vendor lock-in.
Relevance Defined by Positioning, Not Ownership
The connected car has evolved into a shared-platform economy in which ownership of the physical vehicle is no longer sufficient to guarantee value capture. Moving forward, long-term market relevance depends less on protecting rigid vehicle boundaries and more on balancing control with collaboration. OEMs are being repositioned from owning the stack to orchestrating it.
Those that succeed will maintain tight control over integration, safety, and vehicle access while extending their presence into high-impact data and service flows. Those that do not risk being structurally confined to lower-margin hardware layers, losing their grip on the customer experience, and being excluded from the primary monetization loops of the digital connected future.
"As the automotive industry shifts from hardware- to software-defined ecosystems, OEMs’ future hinges on migrating to centralized, advanced E/E architectures and transforming vehicles into personalized digital platforms. To secure long-term loyalty and recurring revenue, automakers must move beyond isolated product development and become scalable, software-centric brands. Success requires an optimal balance between in-house control and deep, cross-industry partnerships with hyperscalers and chipmakers, which can accelerate innovation without surrendering critical user data or ownership of the core brand experience.” Amit Shukla - SBD Automotive Product Owner |  |
How SBD can help
SBD Automotive can help benchmark your position against the wider industry and identify where action is needed most. To explore how these trends impact your strategy, architecture and supplier roadmap, get in touch with SBD Automotive for a deeper discussion. Email info@sbdautomotive.com |