Automotive Engineering and R&D Pulse 2026

What’s keeping automotive leaders up at night?

Automotive Engineering and R&D Pulse Report 2026

What’s keeping automotive leaders up at night?Contents

Solutions
being pursued

01 Increased agility

02 AI & digital

03 Global operating models and talent

Recommendations

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What’s keeping automotive leaders up at night?

Automotive Engineering
and R&D Pulse Report 2026

Pity the carmakers. Following decades of investment in refining combustion engine technology, optimizing global supply chains, and building trusted brands, established carmakers would be forgiven for believing they had an insurmountable lead.

Yet, as our ER&D Pulse survey of 200 automotive leaders shows, their world has changed enormously in the past few years. It faces challenges from all sides – transformed engineering requirements from EVs and smart cars, geopolitical turmoil, and revolutionary engineering technologies, like SDVs (Software Defined Vehicles), and AI/GenAI, which their organizations are struggling to adopt at scale.

Against this backdrop of endless unknowns, Capgemini Engineering seeks to bring some clarity. We surveyed 200 automotive leaders at large organizations – as part of our cross-sector Engineering and R&D Pulse 2026 Report ^[¹^] – to understand how the sector is responding to these pressures. We believe that a collective view of the industry will help everyone, and we hope the data we present here helps companies gauge their position relative to their peers, and better understand shared challenges and solutions.

“Traditional automakers relying on fragmented, outdated systems will struggle to compete in an AI-driven automotive future.”

RJ Scaringe | CEO | Rivian (2025)

“The software-defined vehicle revolution is ten times bigger than EVs.’’

Jim Farley | CEO | Ford (2026)

The challenges

Top of the list of automotive leaders’ concerns was growing competition from new players, cited by 60% of respondents. New entrants from China – as well as Tesla and its imitators – are showing they can produce quality EVs 20% cheape r ^[2] and twice as fast. This is no longer just about lower labor costs outside the West – though it helps – but better mastery of supply chains, smart manufacturing technologies, and agile, collaborative cultures.

This pressure to adapt comes at a time of wider upheaval, when getting parts and skills is becoming harder, costlier, and less certain. Fifty nine percent of automotive leaders cited supply chain disruptions as a major threat to production, whilst 54% cited geopolitical uncertainty, and 55% cited access to talent (Chart 1).

A need for lower costs and time-to-market acceleration

All of this is impacting the bottom line, with 89% of respondents saying costs have increased in the last three years.

It’s not all bad news, however. Companies are rising to the challenge, with most saying their product design and development time, and their production ramp-up time, have decreased in recent years (73% and 68% respectively) – no doubt a sign they are getting better at deploying new digital technologies (Chart 2).

Nonetheless, companies still see an urgent need for further reductions in cost and time-to-market. Many believe they risk losing significant market share to startups and emerging market players within the next five years if they fail to make significant cost reductions (57%) or innovate faster (46%) (Chart 3).

In fact, over the next 2-3 years, most organizations say that – in order to remain competitive – they need to decrease costs by 15-20% (67% of respondents), reduce time for product or service design and development by 10-15% (71% of respondents) and reduce time for production ramp-up or deployment by 5-10% (75% of respondents) (Chart 4).

“As AI rapidly advances, we have been early adopters across our business… embedding AI directly into our vehicles… and accelerating our AI momentum across the enterprise.” ^[3]

Ned Curic | Chief Engineering & Technology Officer | Stellantis

“AI is our key to greater speed, quality, and competitiveness – across the entire value chain.” ^[4]

Hauke Stars | Member of the Board of Management for IT | Volkswagen Group

Looming over all of this is AI, cited by 56% as a disruptive technology and seen by many as an opportunity to address the above challenges.

In a world being disrupted by new challengers, a new geopolitical order, and new technologies, all at once, how are automotive companies responding?

This report looks at data from our survey to examine industry responses, ambitions, and challenges, as well as sharing some of our own insights – learned from working with many leading automotive engineering companies – into how to thrive in this new world.