Global carmakers are wrestling with a new reality: software and digital technology are rapidly eclipsing hardware as the chief source of competitive advantage. A recent KPMG International survey of 775 senior executives projects that by 2035 the industry’s leading profit pools will stem from software-defined vehicles, advanced driver-assistance systems, intelligent cockpits and connected services. The same research signals a dramatic geographic shift, with China expected to house 60% of the world’s top original equipment manufacturers (OEMs). Executives describe this transition as a multi-dimensional disruption, where technology, geopolitics, sustainability and evolving customer expectations collide, turning continuous transformation into the new operating baseline.
Software-driven competition reshapes the global auto landscape
According to the KPMG outlook, the rise of artificial intelligence, connected services and the emergence of software-defined vehicles force manufacturers to rethink how they create value. The study notes that more than half of respondents (52%) already view ongoing transformation as a permanent state rather than a one-off project. Companies that can translate technological breakthroughs into tangible customer benefits—while staying agile across divergent markets—will likely secure the next wave of industry leadership. The report also underscores that China’s expanding ecosystem will accelerate this trend, but success will hinge on each firm’s ability to cultivate the right partnerships and adapt to market-specific demands.
Mexican vehicle production stalls amid tariffs and shifting demand
In parallel, Mexico’s auto sector recorded its steepest October decline since the pandemic began. The nation built 302,803 light-vehicle units in October 2026, a 17.7% drop compared with the same month a year earlier. Export volumes fell to 258,137 units, down 17.9%, a contraction directly linked to the 25% tariff imposed by the United States on Mexican-made cars. The United States remains the dominant destination, accounting for 76.6% of total Mexican exports from January to October, yet even this market saw a 6% reduction in imports compared with 2025.
Export patterns and brand impacts
Canada rose to the position of second-largest market with 338,440 units shipped, a 7.1% increase and a 12.1% share of total exports. Germany, still the third most important destination, shipped 75,507 vehicles but suffered a 13% annual decline. Brazil displayed remarkable growth, more than doubling its imports from Mexico (24,000 to 50,000 units, a 108.1% rise). Smaller markets such as Colombia (+13.1%) and El Salvador (+790.4%) also posted double-digit gains, the latter registering the highest percentage increase among the top ten destinations.
Brand-level data reveal uneven effects. General Motors saw its exported volume plunge 47.2%, largely because the United States cancelled its electric-vehicle incentive program, prompting a production slowdown in Mexican plants. Mercedes-Benz halted local manufacturing altogether. Other manufacturers reported double-digit export contractions: Mazda (-32.5%), Ford (-21.4%), BMW (-23%), Stellantis (-12.9%) and Volkswagen (-11.9%).
Overall, from January through October 2026 Mexico produced 3,254,062 vehicles, a 3.9% dip from the same period in 2025. Light trucks (SUVs and pickups) accounted for 78.7% of production, while passenger cars made up the remaining 21.3%. Total exports for the same timeframe fell 3.3% to 2,786,760 units. Industry analysts at J.D. Power revised the year-end production forecast downwards to 3.8 million units, shy of the earlier 3.9 million estimate. AMIA’s president warned that prolonged tariff exposure could feed through to higher vehicle prices and erode competitiveness, especially as the United States contemplates stricter rules of origin for North-American trade.
Implications for the next decade of automotive strategy
Both narratives point to a common theme: the need for flexibility. While software innovation reshapes the value chain, external pressures such as trade policy and regional demand swings demand that manufacturers maintain adaptable supply networks. Companies that can embed software platforms across vehicle line-ups, while simultaneously diversifying export markets beyond a single dominant buyer, will be better positioned to weather geopolitical headwinds and capture emerging profit pools. For Mexico, the challenge lies in leveraging its manufacturing base to support the software-centric future, perhaps by attracting technology partners and investing in local talent capable of developing the next generation of connected, autonomous, and electrified vehicles.
