2025-11-18 18:37

Tags: [[business]], [[FESCARO]], [[automotive-trends]]

Overview of the European market, integrating trends in automotive software, semiconductor utilization, and cultural characteristics relevant to FESCARO

The European automotive market presents a unique, compliance-driven landscape for suppliers, characterized by aggressive regulatory enforcement, major shifts in vehicle architecture, and strategic changes in how Original Equipment Manufacturers (OEMs) procure semiconductors and software.

Below is a comprehensive overview of the European market, integrating trends in automotive software, semiconductor utilization, and cultural characteristics relevant to FESCARO, based on the KES 2025 presentations and associated sources.

I. European Automotive Market Dynamics and Regulatory Landscape

The European automotive cybersecurity market is currently the fastest-growing region globally.

  • Market Size and Growth: The European automotive cybersecurity market is estimated to hold a 25.1% share of the global market in 2025. It is projected to grow at a Compound Annual Growth Rate (CAGR) of 14.2% from 2025 to 2032. This market opportunity is estimated to be worth approximately €14.2 billion. Germany is the central hub for automotive cybersecurity in Europe, hosting major manufacturers and suppliers like Volkswagen Group, BMW, Daimler, Continental AG, and Bosch (ESCRYPT). Bavaria is specifically identified as an economic powerhouse in Europe and a leader in innovation in Germany.

  • Regulatory Drivers: This explosive demand is mandatory, driven by the UNECE Regulations R155 (Cybersecurity Management System, CSMS) and R156 (Software Update Management System, SUMS). Phase 2 enforcement, which mandates compliance for all vehicles seeking type approval (including existing models), came into full effect in July 2024. These regulations necessitate a “security by design” approach throughout the entire vehicle lifecycle.

  • Market Expansion (CRA): Cybersecurity requirements are expanding significantly beyond passenger vehicles. The EU Cyber Resilience Act (CRA), effective in November 2027, mandates security for all products with “digital elements,” including the non-passenger vehicle sector such as agricultural and construction machinery (Mobile Machines). This CRA compliance wave is expected to expand the addressable market by over €3 billion. Compliance with the emerging ISO 24882 standard for Agricultural Machinery & Tractors will also be required.

The German/European automotive industry is undergoing a structural transformation centered on electrification and software development.

  • Software-Defined Vehicles (SDVs): There is a powerful industry shift toward SDVs, where software must be decoupled from hardware and reusable across all platforms. BMW’s objective is for the vehicle to become one of the customer’s devices, just like a mobile phone, tablet, or laptop.

  • E/E Architecture: The trend is clearly moving towards zonal architecture with centralized computing power. BMW’s Neue Klasse platform uses an advanced technical stack broken into four “super brain” layers.

  • OEM Software Ownership: To overcome legacy issues like long reaction times and poor software ownership, OEMs like BMW are pursuing a new model involving in-house development of software, at least for core systems like the wireless service connectivity stack. BMW specifically plans to take care of the software development from the application layer down to the kernel in their IVI (Infotainment) systems.

  • Cybersecurity Solution Preference: OEMs and Tier 1 suppliers prioritize solutions that address compliance and lifecycle security. Network Security (36.8% share) and Application Security (38.7% anticipated share) are the dominant solution types in 2025. FESCARO’s core products—Secure Gateway (network security) and FAST™ HSM (application/firmware security)—are aligned with these leading segments.

Semiconductors are strategically critical, prompting Europe to seek greater resilience and driving OEMs to fundamentally change their sourcing relationships.

  • Geopolitical Resilience and Strategy: Europe learned lessons from past chip shortages, especially affecting the automobile sector. The region recognizes that semiconductor resilience is a global challenge that no single country can solve alone, necessitating stronger international partnerships with trusted entities such as Korea. The German national microelectronics strategy prioritizes developing new chip types for automotive and securing stable supply for Europe’s user industries.

  • European Strengths and Gaps: Europe holds global leadership in equipment and tools (e.g., ASML) and has a 55% market share in microcontrollers, sensors, and power semiconductors. However, the region has critical gaps in advanced packaging, algorithms, and Printed Circuit Boards (PCBs), where its production share is only 2.2%. Addressing these vulnerabilities requires defining a broader scope of support in the upcoming Chips Act 2.0.

  • Semiconductor Sourcing Shift (Directed Buy): BMW is adopting a Directed Buy model to mitigate supply chain issues, political risks, and lack of transparency with chip suppliers. This involves direct contracts and technical collaboration with semiconductor suppliers, giving the OEM influence over future chipset design and enabling the transfer of software ownership to the OEM. Successful implementation of this model relies on a three-party collaboration between the OEM, the Semiconductor Supplier, and the Tier 1 Supplier.

  • Power Technology Diversification: The shift to electric mobility necessitates different power technologies due to the diverse range of powertrain configurations. Infineon, a market leader in automotive semiconductors, confirms that all three technologies—Silicon (IGBT), Silicon Carbide (SiC), and Gallium Nitride (GaN)—are needed. SiC is expected to be the technology of choice in the coming years for high-efficiency applications like the main inverter, but IGBT remains a cost-efficient “workhorse”. Cost is becoming the most important factor in technology selection.

IV. Cultural and Business Characteristics at European OEMs and Tier 1 Companies

German and European automotive culture is characterized by high demand for trust, stringent compliance standards, and a preference for deep collaboration.

  • Trust and Certification (TISAX): The establishment of trust and credibility is paramount. The single most critical non-technical barrier for suppliers, particularly in Germany, is the lack of TISAX (Trusted Information Security Assessment Exchange) certification. TISAX is the de facto standard required by German OEMs (such as BMW, Audi, and Volkswagen) to share proprietary architectural data, such as Threat Analysis and Risk Assessment (TARA) documentation, which is essential for FESCARO’s Tier 0.5 model. For cybersecurity providers handling sensitive data, Assessment Level 3 (AL3)—involving comprehensive on-site audits—is mandatory.

  • Partnership Focus: European companies increasingly view partnerships as the key success factor in the automotive transformation. The primary motive for seeking new strategic alliances in the EU5 countries (including Germany) is Technology Transfer and Joint Development (56% prioritization). This preference aligns with FESCARO’s “Tier 0.5” positioning, which involves engagement from the earliest stages of vehicle architecture definition.

  • Supplier Qualification Process: The process is lengthy, often exceeding 24–36 months for mass production (SOP) contracts. The critical entry point is securing Advanced Development ( 선행 개발 ) contracts by targeting the OEM’s Cybersecurity Manager, CSMS Office, and Software Architecture Teams, rather than engaging procurement departments immediately.

  • Openness to Korean Suppliers: Despite concerns about foreign competition, there is systematic openness towards Korean partners. BMW, for example, notes that it is actively seeking partnerships with Korean suppliers, and its purchasing volume from Korea was $4.86 billion in 2023. This established trust creates a favorable starting condition for FESCARO.

  • Local Presence: OEMs and Tier 1 suppliers prioritize partners who demonstrate local presence and timely support. The absence of a physical EU office or German-speaking Field Application Engineers (FAEs) is viewed as a competitive disadvantage for Asian suppliers, as R155 compliance requires swift incident response and local support capabilities.

In summary, the European market is mandatory, highly regulated, and structurally favors suppliers who can demonstrate TISAX-validated trust and offer cost-efficient, full-stack solutions that enable joint development on the path toward SDVs.

References