VECS 2026 – The Big Comeback

OEMs learn to love petrol once again.

• The Vehicle Electronics and Connected Services (VECS) trade show has long been focused on EVs, but this year, everyone is dusting off their legacy petrol platforms and working out how to upgrade them to support the latest user experiences.
• This is a blessing in disguise because RFM Research has long forecast that the faster the world migrates to electric, the less time OEMs have to deal with a weakening market for vehicles.
• This is because EVs should be able to travel further before needing to be replaced, meaning that vehicles are replaced less often meaning fewer shipments for vehicle makers.
• Hence, the longer that petrol and diesel vehicles persist, the more time OEMs have to get their ducks in a row to deal with the transition before demand begins to decline.
• Estimates for battery-powered vehicles are falling fast, with forecasts for EVs in the USA now at 21m present in the market by 2030, down from the previous forecast of 36m.
• $70bn in EV assets have been written down by developed market OEMs, and I suspect that there may be more to come unless something changes.
• The situation is similar in Europe, and it demonstrates that for EVs to take off, they need to be better, faster, and the same price as their fossil fuel equivalents.
• Only the Chinese have managed this, but I remain far from convinced that they are doing it economically, and so I don’t know how long this will last.
• This leaves the industry being forced to retrieve their legacy platforms from the rubbish bin and work out how to migrate them from being hardware-defined to software-defined.
• This is increasingly important as many of the new features that are helping to sell vehicles require a modern software architecture that is connected and updatable regardless of the drive train.
• This is the focus of VECS 2026, and while there is an atmosphere of collaboration, the industry remains very far from extracting itself from its present dilemma.
• This is because everyone has a plan for how to migrate their vehicles to become software-defined, and is willing to share, but this is where the trouble starts.
• OEMs want others to adopt their way of doing things and not the other way around, ensuring that everyone will just carry on doing their own thing.
• This is ruinous because the same R&D is being done many times over as opposed to once, making the whole proposition less economically viable.
• One solution is an independent body that develops the lower-level software that is not differentiating for everyone, but there are many of these, and progress to date has been slow.
• The problem for OEMs is that this leaves the door open for the digital ecosystems to make inroads into monetising the value of the vehicle.
• Volvo is a great example of this as by going Google Automotive with Google Automotive Services, it has ceded the entire infotainment opportunity to Google.
• In effect, Volvo has become little more than app developer for its own vehicle, meaning that should there be a vibrant economy created around digital services to the vehicle, it will miss out.
• This is crucial because digital services are probably the best way for OEMs to make up for falling vehicle sales, and missing out here will mean that the value that should accrue to OEMs will accrue outside of the industry.
• The result will be collapsing financial performance and a round of very painful consolidation.
• At VECS it was also clear that robotaxis are now a product but whether or not they can make any money is less clear.
• This is being led by far by Waymo, which tripled the miles it drove in 2025 and is ramping up operations and coverage, but I suspect it is still losing a vast amount of money.
• The problem is that to get to level 4, a huge array of sensors is required to get the error rate down to acceptable levels, and this costs far more than $100,000 to fit onto an existing vehicle.
• Consequently, how Waymo makes money is far from clear, and I continue to think that the cost of the autonomous kit to upgrade a vehicle to level 4 has to come down materially for this to really take off.
• The Chinese claim to have got this cost down to $40,000, but I am not sure that this gets them to level 4, as their target looks more like level 2++, which is where the driver still has liability.
• In my opinion, to really take off, robotaxis need to be better, faster and cheaper than their human equivalents, meaning that there is still some way to go.
• The net result is that it looks to me like that EV and autonomous transition may now occur together rather than separately, which is going to create significant market dislocations.
• VECS may be small and in the relatively remote location of Gothenburg, but it provides a good snapshot into the industry, making it a show I will probably return to next year.