Most automakers likely to cut AI investment by 2029: report

Only a small number of automotive companies are expected to sustain strong investment in AI over the next few years, according to a new Gartner study.

The report predicts that by 2029, just 5% of automakers will maintain high levels of AI investment, compared to over 95% today.

Gartner said carmakers with strong software capabilities and tech-focused leadership are most likely to stay ahead, which could widen the gap between established manufacturers and newer, tech-driven companies.

Legacy firms such as Volkswagen face challenges in catching up with Tesla and BYD.

Internal barriers and outdated approaches make it harder for traditional automakers to adapt, and success in AI will require prioritizing technology at the highest levels, according to Gartner analyst Pedro Pacheco.

🔗 Source: Reuters

🧠 Food for thought

Implications, context, and why it matters.

Automakers need the right setup to make AI work

Gartner’s Pedro Pacheco says automakers must become digital first groups with software chiefs reporting to CEOs 1. They also need more than a tools budget 1.
Gartner sees long term AI spending falling by 2029 because organizational hurdles persist 1. Many legacy automakers excel at mechanical engineering but lag in software 1.
Through 2026, 20% of organizations will use AI to flatten org charts 2. More than half of current middle manager roles could go, which will force new decision models 2.
Teams need to clear internal barriers and old mindsets 1. Software leaders must have authority and resources to drive change 1.

Spin-offs are speeding up, which opens new deal windows for tech and private equity

As original equipment manufacturers reassess AI budgets, they are restructuring 3. Continental confirmed it will sell ContiTech in 2026 and will spin off its Automotive group sector as AUMOVIO, the planned standalone automotive unit, in September 2025 3.
S&P Global plans to separate its Mobility segment into a standalone public company within 12 to 18 months 4. The segment includes CARFAX, a vehicle history data provider, and other automotive data or software brands 4.
NXP Semiconductors bought TTTech Auto in June 2025 to pair safety middleware, software that connects the operating system and applications, with hardware platforms 5. Buyers want automotive software assets 5.
PwC says diligence led valuations in automotive fell by as much as 20% in fiscal year 2025 6. Well capitalized buyers see better entry points 6.