Tesla was No. 1 in the Gartner Digital Automaker Index for the second straight year, despite being the only brand in the top five to lose ground. The U.S. EV maker was praised in the report for being able to generate revenue from its over-the-air software updates.
Tesla, Rivian and Chinese electric vehicle makers continue to have a big lead over legacy automakers such as Jaguar Land Rover and Toyota in the race to transform into a technology company, according a new ranking.
The second annual Gartner Digital Automaker Index, which evaluates 22 automakers in nine categories and draws on 13,919 different data points, showcased the large deficit legacy automakers need to erase to match the digital prowess of their much younger rivals.
To read more about last year's digital automaker index results, click here.
"Software should be the highest priority for an automaker today," Gartner analyst Pedro Pacheco, who is one of the creators of the index, told Automotive News Europe. "There is no room for complacency in this very fast-moving, aggressive area."
Despite all automakers recognizing that they need to find a way to generate interest –and especially income -- from their software, the index shows that traditional brands are struggling compared with Tesla, Rivian, Nio to truly transform into software-first companies.
In 2024, Tesla remained the leader at the top of the index. Nevertheless, it has slipped 4 percent compared with 2023.
"Tesla is starting to show some shortcomings in the connectivity category because they still don't have 5G, they still haven't moved into satellite connectivity and the user score for their app is deteriorating," Pacheco said.
Tesla also lost points because of the frequent reshuffling of its leadership team. Last month the vice president of Tesla's finance and business operations resigned. Sreela Venkataratnam was the fourth executive to depart in five months.
"It is not 100 percent clear how things are working at the top," Pacheco said. "Tesla still has a good number of people with expertise in terms of leadership, but there have been many changes recently and it's too early to tell how this is going to turn out for Tesla."
On a positive note, Tesla was praised in the report for already being able to generate revenue from its over-the-air software updates.
Gaining on Tesla
Meanwhile, Chinese and U.S. EV makers are starting to catch up with Tesla. Second-ranked Nio increase its score in the index by 2 percent. China's Xpeng and Rivian of the U.S., meanwhile, moved up 13 percent (see table, below).
Rivian, for instance, has improved the efficiency of its refreshed R1T pickup and R1S crossover by giving them a new computer network and zonal electronics architecture. Rivian's zonal architecture is considered one of the most advanced in the market, according to the index, which is why Rivian tied for first in this crucial category, alongside Nio, Tesla and Xpeng (see table, below).
Other Chinese automakers, such as Geely and BYD, have also made great strides over the last year. "Overall, the average performance of Chinese automakers is extremely good," Pacheco said.
Tough times for JLR, Toyota
In contrast, JLR finished at the bottom of the index, where it was last year with virtually the same score.
The British automaker "needs to improve in every area," Pacheco said.
This includes improving leadership's knowledge of technology, prioritizing vehicle software, increasing software engineers' pay, adopting a more contemporary vehicle architecture and taking a big step forward in terms of autonomous driving and electrification.
Toyota rests third from the bottom, down 7 percent from 2023. One reason is that the automaker's head of vehicle software no longer reports to the CEO, Pacheco said, adding that this sends the wrong message about Toyota's commitment to software.
Transformation takes time
Pacheco concedes that it will take a long time for any traditional automaker to transform into a technology company. He said the key weaknesses most legacy brands have are that their leadership, culture and talent are clearly not software-centric enough compared with their rivals.
Several CEOs at the newer brands started in the tech world, therefore when there is a major software-related problem they tackle it immediately, Pacheco said. CEOs who have only worked in the automotive sector normally place lower priority on technical issues. Moreover, software at many legacy brands is often led by someone who is not even part of the executive board or doesn't report to the CEO, leading to a different approach toward software, Pacheco said.
To reverse this trend the leaders at legacy automakers need to "think software first." Pacheco said. That means leaders must prioritize technology, create a culture that emphasizes software and ensure that the company attracts and retains top technology talent. Many legacy automakers don't pay their top software engineers salaries that match or exceed what they can get from a tech company, therefore they leave.
Cultural change remains a challenge
Moreover, changing the culture of a company remains "massively hard," Pacheco said. "The new incumbents were born thinking more like a software company, while legacy automakers weren't. So, there needs to be a major transformation in the culture of the organization. And this needs to start at the top."
Instigating change at the board level, for example, can be very difficult as many executives hail from the traditional automotive world. The board also wants to please shareholders, who value short-term profits, placing the CEO in a difficult position when it comes to instigating major changes in the organization with regard to software, Pacheco said.
U.S. leads with China catching up
In terms of geography, the index illustrated that U.S. automakers altogether are slightly ahead of Chinese automakers in the race for software supremacy. "It's good to see where the strength is in terms of car software," Pacheco said. "That is clearly the U.S., which is No. 1, but China is a terrific challenger."
Europe is a distant third with South Korea right behind. Japan's performance, meanwhile, has deteriorated (see table, above).
