Scaling software-defined vehicles: From build to organizational readiness 

• Software: Software is the primary enabler of software scalability because it decouples vehicle capability from hardware, allows continuous evolution after sale and turns the car into a programmable, updatable platform. The hallmarks of an SDV-ready vehicle are hardware abstraction layers (HALs), middleware and service-oriented architectures and software features running on centralized or zonal compute.
• E/E architecture: Zonal E/E architectures allow abstracted hardware layers, standardized communication interfaces and a service-oriented architecture (SOA), further enabling reusable code across multiple models, faster time-to-market and reduced data management and integration pain (one of the biggest SDV bottlenecks). Without a zonal E/E architecture, an automaker faces significant challenges in deploying a unified vehicle OS, supporting full-vehicle secure over-the-air (OTA) updates, consolidating compute and simplifying software, monetizing features at scale, running advanced system settings like AI integration and ADAS models on a central computation platform or maintaining cybersecure and updatable vehicles.
• Over-the-air (OTA) updates: Secure OTA updates are foundational to SDV readiness because they turn the vehicle from a static product into a continuously evolving software platform. OTA enables software updates post-production, feature deployment without dealer visits and hardware reuse across multiple vehicle generations. This in turn speeds up SDV vehicle innovation cycles, extends vehicle life and reduces platform fragmentation. If an automaker can update any software layer securely, frequently and at fleet scale, then it is organizationally and technically ready for software scaling.

Mainland Chinese automakers are making faster and more consistent strides in SDV development and software scalability than most global OEMs because they possess a unique combination of cultural, structural, technological and market advantages that favor rapid software-driven innovation.

• Software-first mindset: Being young OEMs, mainland Chinese automakers have fewer legacy systems to overcome. Many of these OEMs were established in the smartphone/consumer electronics era and not the internal-combustion era, giving them a native SDV culture. They inherently prioritize features such as centralized compute, secure OTA updates, unified OS stacks, advanced integration technology and rapid feature deployment.
• Flatter organizational structures: Mainland Chinese automakers, particularly the New Energy Vehicle (NEV) startups, often have a unified leadership (CEO/CTO directly drive product and software), which translates into fewer decision layers and flatter organizational structures with high engineering autonomy and the ability to reallocate budgets quickly.
• Deeper vertical integration and faster SDV cycles: Mainland Chinese OEMs and technology companies are rapidly developing complete end-to-end intelligent platforms, encompassing everything from hardware (chips and batteries) to operating systems, middleware, applications and cloud data compliance for SDVs. By leveraging in-house capabilities, mainland Chinese companies have cut their average development cycles to as little as 18–24 months from concept to production, compared to the industry average of five to seven years.
• Rich local supply ecosystem: Mainland China has a highly mature local ecosystem of suppliers and partners for systems on a chip (SoCs); lidar, radar and high-resolution cameras; battery management systems; gigacasting; domain/zonal controllers and OTA and cloud infrastructure services. This reduces over-dependency on global suppliers and, consequently, lead times, engineering friction and bill of materials costs, while supporting rapid prototyping and deployment cycles.
• Strong governmental push: Central, provincial and municipal governments in mainland China support SDV growth via national intelligent vehicle standards, subsidies for V2X infrastructure, fast homologation pathways, pilot zones for L3/L4 testing and easier data collection frameworks (within domestic cloud compliance rules).

OEMs globally are reshaping software scalability plans as the electric vehicle (EV) slowdown forces more selective make-vs.-buy decisions. They now rely more on partners for speed and cost control. This is evident in their collaboration models, which are diverging by region. While mainland China pushes for in-house vertical integration, North America follows hybrid technology partnerships, and Europe is increasingly shifting from in-house ambitions toward pragmatic outsourcing. The winning strategy is a balanced mix of proprietary control, shared platforms and strong regional partnerships that can adapt in uncertain markets.

S&P Global Mobility’s SDV Readiness Level benchmark provides a comprehensive framework to assess a vehicle’s software readiness, categorizing it from Level 0 (Not Connected) to Level 5 (Fully Ready), an approach similar to SAE’s Autonomy Levels. According to S&P Global Mobility, global EV startups, including those from mainland China, have been quick to accelerate their SDV readiness and challenge the likes of Tesla, which is expected to make up more than a quarter of the SDV Readiness Level 4 and 5 volumes in 2030. By 2030, as many as 11 mainland Chinese automotive brands are expected to be among the top 15 manufacturers of Readiness Level 4 and 5 SDVs, highlighting their advanced connectivity.

Despite their rapid progress, mainland Chinese automakers still face several structural, technical, regulatory and global expansion challenges in SDV vehicle deployment. These challenges impact software scalability, global competitiveness and the long-term sustainability of their SDV strategies. Since mainland Chinese SDV stacks depend on domestic cloud providers and comply with local cybersecurity governance and V2X standards, they need costly re-engineering to sell vehicles to Western markets.

Vehicles made in mainland China depend heavily on the local AI/chip ecosystem. These chips lack the global certifications (ISO 26262 ASIL-D, AEC-Q100 grade 0) and maturity of NVIDIA/Qualcomm chips and have limited support outside China. Chinese OEMs also rapidly build in-house stacks with proprietary middleware, which are often incompatible with other platforms. As a result, integrating, scaling and maintaining these vehicles is more complex and costly.

Mainland Chinese SDV deployments are also perceived to carry rising software quality issues and technical debt—the costs and inefficiencies that result from quick software development choices. Rapid SDV development cycles lead to frequent bugs, inconsistent OTA performance and regressions after updates. Combined with a “ship now, patch later” culture borrowed from consumer electronics and an ineffective validation framework compared to German/Japanese OEMs, this is likely to create significant costs in the short to medium term.

Tesla remains the reference architecture for software scalability and SDV readiness, but the next generation of SDV vehicles will reward not just speed and control but cloud compliance maturity, cybersecurity governance and ecosystem scalability. According to S&P Global Mobility, both Nio and Xpeng currently lead Tesla in SDV readiness and autonomy, though their overall number of connected vehicles worldwide remains modest.