A modern car is one of the most complex connected devices most people will ever own. It carries dozens of computers, hundreds of sensors, a cellular modem, satellite positioning, Bluetooth, Wi-Fi and, increasingly, software that its maker can change long after it has been sold. It reports its location, its battery health, its tyre pressures and its fault codes. In some cases it can be unlocked, located, diagnosed and even upgraded from thousands of kilometres away.
That was not always true. For most of the automobile's history, the moment a car left the showroom, the manufacturer lost touch with it. Any information about how it was used came back through dealer service visits, warranty claims or recalls.
The change from isolated machine to connected device has been gradual, and it is still under way. This article looks at how IoT entered the car, how big the market has become, where the value and friction lie, and what the next phase is likely to bring.
From Crash Calls To Constant Connection
The earliest connected car services were about safety. General Motors launched OnStar in the United States in 1996, combining a cellular connection with satellite positioning so that drivers could call for help and emergency services could be sent automatically after a crash. For years, that kind of service was a premium extra.
Regulation pushed it into the mainstream. In the European Union, eCall, a system that automatically contacts emergency services after a serious collision, became mandatory for new car and van models from April 2018. Every such vehicle had to carry a cellular module and satellite positioning by law. Once that hardware was in place, carmakers had every reason to use it for more than emergencies.
Around the same time, smartphones changed what drivers expected. Navigation, music streaming and messaging moved into the dashboard, first through phone mirroring and later through built-in systems. Electric vehicle makers went further. For an EV, remote battery monitoring, charging management and software updates are not extras but part of how the product works.
The result is that connectivity has quietly become standard. According to Counterpoint Research, 75 per cent of cars sold worldwide in 2024 had embedded cellular connectivity, with BYD the leading brand in connected car sales. A decade ago, that figure would have been a small minority.
How Big The Automotive IoT Market Is
Measuring "automotive IoT" as a single number is difficult, because it spreads across hardware, connectivity, software, cloud services and the data economy around vehicles. Market research firms publish widely varying estimates. A more useful lens is the wider shift to software and electronics, which is where most connected features live.
In its January 2026 software market outlook, McKinsey estimated that the automotive software and electronics market will reach about $519 billion by 2035, growing at around 4.5 per cent a year from 2025. Within that, the fastest growth is expected in advanced driver assistance and automated driving, at about 19 per cent a year, and in operating systems and middleware, at about 16 per cent. Infotainment and connectivity are forecast to grow more slowly, at around 6.8 per cent a year, because they are already widespread.
That pattern tells an important story. Basic connectivity is becoming a commodity. The growth, and the competition, is moving to what runs on top of it.
What Is Inside A Connected Car
To understand the market, it helps to know what the hardware actually looks like.
The Telematics Control Unit
At the centre is the telematics control unit, or TCU: a module containing a cellular modem, satellite positioning receiver and processor. It handles the car's link to the outside world. Most new TCUs support 4G LTE, and a growing share support 5G. Many use embedded SIMs, which let the carmaker or the owner change mobile operator without swapping hardware.
Sensors And In-Vehicle Networks
Inside the car, sensors measure everything from wheel speed and engine temperature to battery cell voltage, cabin air quality and the distance to the car in front. These feed dozens of electronic control units connected by internal networks such as CAN bus and, increasingly, automotive Ethernet, which carries the higher data volumes needed by cameras and driver assistance systems.
Gateways And Central Computers
A central gateway sits between internal networks and the TCU, deciding what data may leave the vehicle and what commands may enter it. In newer designs, much of the logic that used to live in scattered control units is being consolidated into a few powerful central computers, which makes the car easier to update and manage.
The Cloud Backend
Outside the vehicle, carmakers run large cloud platforms that manage millions of cars: collecting data, pushing updates, running apps, handling remote commands and feeding information to service, engineering and product teams.
Where The Value Is
Connectivity costs money: modules, data plans, cloud infrastructure and security teams. Carmakers and suppliers justify that spending in several ways.
Over-The-Air Updates
The single most important use may be over-the-air (OTA) software updates. A car that can be updated remotely can have bugs fixed, security holes closed, features improved and some recalls resolved without a workshop visit. Tesla made this mainstream, and most major manufacturers now offer at least some OTA capability. The savings on recall logistics alone can be significant, and the ability to improve a car after sale changes how it ages.
Diagnostics And Predictive Maintenance
Connected cars can report faults as they occur and, in some cases, before they become failures. That lets dealers order parts in advance, lets fleet operators schedule servicing around downtime, and gives engineers early warning of problems across a model line.
Fleets And Commercial Vehicles
In commercial transport, telematics is long established. Logistics firms, delivery companies, rental operators and public transport authorities use vehicle data to track location, monitor driver behaviour, manage fuel or energy use, and plan maintenance. With more vehicles now connected from the factory, fleet managers can often get this data directly from the manufacturer rather than fitting aftermarket boxes.
Electric Vehicles And Charging
EVs depend on connectivity more than combustion cars. Remote monitoring of battery state, preconditioning, charging schedules, route planning with charger availability and payment at public chargers all rely on a live link. As grids adapt to more EVs, connected charging will also matter for managing demand and, in time, for bidirectional charging.
Insurance And Usage-Based Services
Driving data can support usage-based insurance, where premiums reflect how and how much someone drives. It is also used for road-charging pilots, parking, tolling and stolen-vehicle recovery.
Subscriptions And Digital Services
Carmakers have also tried to sell features as subscriptions: navigation, remote functions, streaming, advanced driver assistance, even performance upgrades. This remains the most contested part of the business model. When BMW tried charging a monthly fee for heated seats in some markets in 2022, the backlash was strong enough that it dropped the idea the following year. Customers appear willing to pay for services that clearly cost money to run, such as data and navigation, and resistant to paying again for hardware already fitted to their car.
The Software-Defined Vehicle
The industry's term for where all of this is heading is the "software-defined vehicle". In simple terms, it means a car whose features are determined more by software than by fixed hardware, and which can be changed over its life.
That requires a new electrical and electronic architecture. Traditional cars grew by adding a new control unit for each new feature, until some models carried more than a hundred, each with its own software from a different supplier. Newer designs group functions into zones around the car, controlled by a small number of central computers. McKinsey expects these newer architectures to rise from less than 30 per cent of production volume in 2025 to 77 per cent by 2035.
For IoT, the shift is important. A centralised car is easier to connect securely, easier to update and able to produce cleaner data. It also changes the balance of power in the supply chain, as carmakers take more software in-house and chipmakers, cloud providers and software firms gain influence.
Vehicle-To-Everything Communication
So far, most car connectivity links the vehicle to the cloud. The next layer links vehicles directly to each other, to traffic signals, to roadside units and to pedestrians. This is known as vehicle-to-everything, or V2X.
The idea is that cars can warn each other of hazards beyond the reach of their own sensors: a vehicle braking hard around a blind corner, a red light about to change, roadworks ahead. For years the technology was held back by a standards dispute between an older Wi-Fi-based approach, DSRC, and cellular V2X, known as C-V2X.
In the United States, that dispute has largely been settled. In November 2024, the Federal Communications Commission adopted final rules allowing C-V2X to use 30 MHz of spectrum in the 5.9 GHz band, between 5.895 and 5.925 GHz, and setting out a transition away from DSRC. China has pushed C-V2X through national planning and pilot zones. In Europe, the picture is more mixed, with both approaches in use.
V2X's challenge has always been the network effect. Its value depends on enough cars and roadside units supporting it. Regulatory clarity is a necessary step, but deployment will depend on carmakers, road authorities and cities investing together.
The Hard Questions
The connected car brings real benefits, but also problems the industry is still working through.
Cybersecurity
Every connection is a potential entry point. Researchers have repeatedly shown that vehicles can be attacked remotely, and a large-scale attack on a connected fleet is a genuine safety concern. Regulators have responded. The UN regulation on vehicle cybersecurity, UN R155, requires carmakers to run a certified cybersecurity management system across a vehicle's lifecycle, and a companion regulation, UN R156, covers software updates. In the European Union, R155 applied to new vehicle types from July 2022 and to all newly registered vehicles from July 2024. Compliance has forced manufacturers to treat security as an ongoing operational function rather than a one-off engineering task.
Privacy
Cars generate highly personal data: where people go, when, how fast and how they drive. How that data is used has become a regulatory flashpoint. In January 2026, the US Federal Trade Commission finalised an order against General Motors and OnStar over allegations that they collected and sold drivers' location and driving behaviour data without proper consent. The order bans the companies from sharing such data with consumer reporting agencies for five years and requires affirmative consent for collecting connected vehicle data, with obligations lasting 20 years. The case has put every carmaker on notice about consent and transparency.
Geopolitics
Connected cars have also become a national security issue. In early 2025, the US Commerce Department finalised rules restricting connected vehicle software and hardware linked to China and Russia, phasing in over the following model years. Other governments are examining similar questions. For global carmakers and suppliers, that means supply chains for connectivity modules and software may increasingly split along political lines.
Network Lifecycles
Cars last far longer than mobile technologies. When operators in the United States switched off their 3G networks in 2022, millions of older vehicles lost connected services such as emergency calling and remote unlocking. The same issue will return as 4G networks eventually age. Choosing hardware that can survive network transitions, or be upgraded, is a real design problem for a product expected to last 15 years or more.
Cost And Consumer Trust
Finally, carmakers still have to prove that connected services are worth what they cost, both to themselves and to drivers. Services that save time, money or lives are easy to justify. Features that feel like charging twice for the same car tend to damage trust.
What Comes Next
Several trends are likely to shape the next phase of automotive IoT.
5G and lighter 5G modules. As 4G ages, 5G will become the default in new vehicles. Reduced-capability 5G, known as RedCap, may suit functions that need modern network support without the cost of full 5G.
Satellite connectivity. Direct-to-device satellite services are beginning to fill coverage gaps. Emergency messaging and basic connectivity in remote areas are obvious first uses, particularly for off-road, rural and commercial vehicles.
AI in the cabin and the cloud. Voice assistants built on large language models are starting to replace rigid command menus. In the backend, AI is being applied to fleet-wide data to spot defects earlier, optimise charging and personalise services. McKinsey's analysis suggests AI could influence a large share of the automotive software market over the next decade.
Deeper integration with infrastructure. EV charging networks, smart grids, traffic management systems and parking are all becoming connected. Cars will increasingly act as nodes in these wider systems rather than as standalone products.
Commercial vehicles leading. Trucks, vans and buses often adopt connected technology faster than private cars, because operators can measure the return directly in fuel, uptime and safety. Many innovations will likely prove themselves in fleets first.
Regulation setting the pace. Cybersecurity, data protection, emergency calling, V2X spectrum and supply chain rules will continue to decide what is possible, and how quickly, in each market.
The Road Ahead
The connected car is no longer a future concept. In 2024, three in four new cars sold worldwide already carried a cellular link, and the question has moved from whether cars should be connected to how that connection is used, secured and paid for.
For professionals in the IoT industry, the automotive sector offers a clear view of both the opportunity and the difficulty of connecting physical products at scale. The technology largely works. The harder problems are about architecture, security, privacy, long product lifecycles and business models that customers accept. How carmakers answer those questions over the next decade will shape not only what cars can do, but how much people are willing to trust them.
