Toyota's Software Struggles Highlight Legacy Carmakers' Transformation Challenges

In the past decade, traditional automakers like Toyota and Volvo have been racing to develop software-defined vehicles to compete with tech-savvy rivals like Tesla and Chinese EV startups. However, as of August 2025, these legacy carmakers are still struggling to make the transition.

Toyota's much-hyped software platform, Arene, has faced numerous setbacks, with the initial version only powering the infotainment and safety features of the RAV4 SUV. Executives have acknowledged that Arene is "not a big bang" and a Woven software engineer has even described it as "horrendous" and "full of bugs."

Similarly, Volvo Cars' efforts to develop a new centralized computing system for its flagship EX90 model have been plagued by delays and ballooning costs, leading to the departure of its CEO and the rehiring of a former boss to navigate the uncertainty.

These challenges highlight the difficulties legacy automakers face in transitioning from their hardware-centric roots to a software-first approach. Industry analysts warn that the auto industry is likely to follow the path of smartphones and PCs, with a small number of dominant operating systems eventually controlling the software space.

While traditional carmakers are investing heavily in software development, they continue to lag behind Tesla and Chinese EV makers in the Gartner "digital automaker index" that measures their potential to monetize software. This underscores the uphill battle legacy automakers face in adapting to the industry's rapidly evolving landscape.