Automakers have poured unprecedented resources into artificial intelligence over the past two years, betting that software-defined vehicles, automated driving, and new digital services will reshape the global auto market. But a new Gartner study suggests this aggressive investment cycle may not last. According to the firm’s 2026 outlook, only a tiny fraction of carmakers—around 5%—will maintain strong AI investment growth by 2029, a dramatic decline from the more than 95% doing so today. The findings signal a looming shakeout in an industry racing to redefine itself while confronting economic pressure, internal bottlenecks, and intensifying global competition.

The report highlights a widening divide between automakers with deep technological foundations and those still reliant on traditional engineering-driven models. For legacy manufacturers, the risk is not just slower innovation—it is falling permanently behind rivals who treat AI as the core of their corporate identity rather than an optional enhancement.

A Shrinking Circle of AI Leaders
Gartner’s analysis indicates that sustained AI leadership will depend on more than money. Companies must embed software expertise into their organizational DNA, positioning AI as a strategic priority rather than a side project. Automakers that fail to modernize internal structures, attract top engineering talent, and adopt long-term digital roadmaps are likely to pull back on spending as costs rise and results lag.

Carmakers that excel in software integration—those with unified operating systems, rapid over-the-air update capabilities, and proprietary AI architectures—will be best positioned to maintain momentum. These companies see AI not just as a tool for autonomous driving, but as a platform for new revenue models, predictive maintenance, optimized manufacturing, and personalized user experiences. For them, scaling AI investment is part of a multi-decade vision rather than a short-term trend.

Legacy Automakers Face Structural Barriers
Volkswagen and other established giants illustrate the industry’s core challenge: decades of excellence in mechanical engineering do not necessarily translate into leadership in software-defined mobility. Despite billions spent on digital transformation, many legacy firms remain hampered by siloed departments, outdated development cycles, and a shortage of tech-oriented leadership.

Gartner analyst Pedro Pacheco emphasized that true transformation requires becoming “digital-first,” a shift that demands both cultural overhaul and structural change. That includes elevating software divisions to the same strategic importance as vehicle design and manufacturing, with chief software officers reporting directly to CEOs. Without such reforms, traditional automakers risk losing the scale and speed required to compete with Tesla, BYD, and other tech-native competitors that treat AI advancement as a relentless, iterative process.

AI Euphoria Meets Economic Reality
The industry’s AI optimism has been fueled by a wave of breakthroughs in generative AI, autonomous systems, and battery-software integration. Yet the economic landscape is increasingly challenging. Automakers face rising costs, uncertain regulatory paths, and cooling EV demand in some markets. As profitability pressures intensify, companies without clear digital strategies may retreat from ambitious AI commitments, further widening the performance gap in the global auto sector.

What Comes Next
The next three years will determine the future hierarchy of the automotive industry. Automakers that fully embrace software-centric strategies, prioritize executive-level tech leadership, and maintain long-term investment discipline are poised to emerge as winners in the AI-driven mobility era. Those that fail to evolve risk being left behind as AI becomes the defining competitive edge in vehicle development, customer engagement, and operational efficiency.