AI-Based Driving Systems (L2 to L5) Market Led by North America in 2025; Asia Pacific to Register Fastest CAGR

AI-Based Driving Systems (L2 to L5) Market Size, Share, Trends and Growth Forecast

The AI-based driving systems (L2 to L5) market is accelerating, with forecasts predicting hundreds of millions in revenue growth between 2025 and 2034, powering sustainable infrastructure globally. The growing adoption of autonomous vehicles by fleet operators to reduce their dependency on manual drivers coupled with rapid development in the ADAS industry has played a vital role in shaping the industrial landscape.

Moreover, the integration of AI in driving systems for enhancing safety as well as numerous government initiatives aimed at mandating ADAS in commercial vehicles is contributing to the industry in a positive way. The technological advancements in autonomous driving coupled with the increasing use of embedded sensors in modern vehicles is expected to create ample growth opportunities for the market players in the upcoming days.

Introduction

The AI-based driving systems (L2 to L5) market is a crucial sector of the automotive industry. This industry deals in the development and distribution of AI-enabled driving solutions across the world. There are several levels of autonomous driving developed in this sector comprising of level 2, level 3, level 4, and level 5. The main components of this sector include AI hardware (Chips, GPUs, ASICs, FPGAs), software (perception, planning, control algorithms), sensors (LiDAR, radar, cameras, ultrasonic sensors), connectivity modules (V2X, 5G, Edge Devices), HD mapping & localization tools and some others. These components are designed for different types of vehicles including passenger cars, commercial vehicles, robotaxis and some others. The end-users of this sector comprise of OEMs, tech providers / ai startups, fleet operators, mobility-as-a-service (MaaS) companies, logistics & delivery companies and some others. This market is expected to grow significantly with the rise of the electric vehicle industry in different parts of the globe.

Highlights of the AI-based driving systems (L2 to L5) market

• North America generated highest revenue of the AI-based driving systems (L2 to L5) market with a share of 36%.
• Asia Pacific is expected to rise with the highest CAGR during the forecast period.
• By automation level, the level 2 segment held the largest share of the market with 52%.
• By automation level, the level 4 segment is expected to rise with the highest CAGR during the forecast period.
• By component, the AI hardware segment led the market with a share of 34%
• By component, the software segment is expected to grow with the fastest CAGR during the forecast period.
• By vehicle type, the passenger vehicles segment held the largest share of the market with 58%.
• By vehicle type, the robo-taxis / autonomous shuttles segment is expected to rise with the fastest CAGR during the forecast period.
• By propulsion type, the electric vehicles (EVs) segment led the industry with a share of 44%.
• By propulsion type, the internal combustion engine (ICE) segment is expected to grow with a significant CAGR during the forecast period.
• By end user, the OEMs segment dominated the market with a share of 49%.
• By end user, the fleet operators segment is expected to grow with the fastest CAGR during the forecast period.

What are the Trends of the AI-based Driving Systems (L2 to L5) Market in 2025?

The major trends in this market consists of partnerships, popularity of autonomous vehicles and government initiatives related to ADAS.

Partnerships

• Numerous automotive brands are partnering with driving systems developers to integrate AI-based driving solutions in modern cars. For instance, in January 2025, Hyundai Motor Group partnered with NVIDIA. This partnership is done for developing an AI-based driving solution to enhance autonomous driving in Hyundai vehicles.(Source: Hyundai Motor)

Popularity of Autonomous Vehicles

• The adoption of autonomous vehicles has gained utmost popularity in recent times for reducing dependency on manual drivers and enhancing driving experience. For instance, in February 2025, Lyft launched a new range of driverless cars in North Texas. These self-driving cars are designed to reduce the dependency on manual drivers.(Source: Wfaa)

Government Initiatives Related to ADAS

• Government of various countries such as India, the U.S., UK, Germany and some others are mandating ADAS in vehicles to enhance vehicular safety. For instance, in March 2025, the ministry of road transport and highways (MoRTH) in India launched an initiative at mandating ADAS. Under this initiative, the vehicle that carry more than 8 passengers is mandated to integrate Advanced Driver Assistance System (ADAS) by April 2026.(Source: Telematicswire)

Automation Level Insights

How did the Level 2 Segment Led the AI-based Driving Systems (L2 to L5) Market in 2025?

The level 2 segment dominated the market with 52%. The growing use of L2 autonomous solutions in mid-ranged vehicles for enhancing the driving experience and improving safety has boosted the market expansion. Additionally, the integration of adaptive cruise control (ACC), lane-keeping assist (LKA), automated parking assistance and traffic jam assist in L2 vehicles has driven the growth of the AI-based driving systems (L2 to L5) market.

The level 4 segment is expected to grow with the highest CAGR during the forecast period. The rising emphasis on integrating high-level of autonomy in luxury cars to enhance the convenience and safety has boosted the market growth. Also, the deployment of L4 autonomous cars by different ride-sharing platforms such as Uber, Waymo, Beijing Didi Chuxing Technology Co., Ltd. and some others is expected t boost the growth of the AI-based driving systems (L2 to L5) market.

Component Insights

What made the AI hardware to be the most dominant segment of the AI-based driving systems (L2 to L5) market in 2025?
The AI hardware segment led the market with a share of 34%. The growing use of advanced ultrasonic sensors in luxury cars to enhance autonomous driving has boosted the market growth. Additionally, rapid investment by electronic companies to manufacture a wide range of ADAS hardware components including chips, GPUs, ASICs, FPGAs along with increasing application of 360’ cameras in driverless cars is playing a prominent role in shaping the industrial landscape. Moreover, partnerships among automotive brands and electronic brands to develop a wide range of components to cater the needs of autonomous cars is expected to drive the growth of the AI-based driving systems (L2 to L5) market.

The software segment is expected to expand with the fastest CAGR during the forecast period. The growing deployment of cloud-software to enhance autonomy in in modern cars has boosted the market expansion. Also, rapid investment by startup companies to develop advanced software to cater the needs of autonomous vehicles is playing a prominent role in shaping the industrial landscape. Moreover, collaborations among automotive brands and software developers to integrate advanced software in SDVs is expected to foster the growth of the AI-based driving systems (L2 to L5) market.

Vehicle Type Insights

Why did the Passenger Vehicles Segment Held the Largest Share of the AI-based Driving Systems (L2 to L5) Market in 2025?

The passenger vehicles segment led the market with a share of 58%. The growing demand for luxury cars in several countries such as Singapore, Japan, the U.S., UK, Germany, France and some others has boosted the market growth. Also, the integration of partial autonomous driving systems in mid-ranged cars for enhancing safety coupled with numerous government initiatives for mandating ADAS in passenger cars is expected to propel the growth of the AI-based driving systems (L2 to L5) market.

The robo-taxis / autonomous shuttles segment is expected to grow with the highest CAGR during the forecast period. The rising adoption of robotaxis by several ride-sharing companies to reduce their dependency on manual drivers has driven the market expansion. Additionally, partnerships among autonomous shuttles and automotive brands for integrating AI-based driving systems in vehicles is expected to foster the growth of the AI-based driving systems (L2 to L5) market.

Propulsion Type Insights

What Made the Passenger Cars Segment to Lead the AI-based Driving Systems (L2 to L5) Market in 2025?

The electric vehicles (EVs) segment dominated the industry with a share of 44%. The growing adoption of electric vehicles in developed nations with an aim at reducing vehicular emission has boosted the market growth. Additionally, numerous government initiatives aimed at enhancing safety in EVs coupled with rise in number of EV startups is playing a vital role in shaping the industrial landscape. Moreover, numerous partnerships among EV makers and software developers to integrate autonomous driving technology in EVs is expected to boost the growth of the AI-based driving systems (L2 to L5) market.

The internal combustion engine (ICE) segment is expected to rise with a significant CAGR during the forecast period. The growing demand for high-performance cars from youths coupled with integration of L2 driving systems in compact SUVs to enhance vehicular safety has boosted the market growth. Also, rapid investment by automotive brands to incorporate advanced sensors in luxury buses to enhance the driving experience is playing a vital role in shaping the industry in a positive direction. Moreover, collaborations among automotive companies and AI developers to develop advanced driving systems for heavy-duty trucks is expected to drive the growth of the AI-based driving systems (L2 to L5) market.

End User Insights

How did the OEMs Segment Led the AI-based Driving Systems (L2 to L5) Market in 2025?

The OEMs segment dominated the market with a share of 49%. The growing consumer preference to use genuine driving systems in their vehicles has boosted the market growth. Additionally, numerous offers and benefits provided by automotive OEMs for regular servicing coupled with partnerships among automotive OEMs and AI providers to develop advanced frameworks to enhance autonomous driving is expected to propel the growth of the AI-based driving systems (L2 to L5) market.

The fleet operators segment is expected to expand with the highest CAGR during the forecast period. The rising adoption of autonomous vehicles by fleet operators to reduce dependency on manual drivers along with collaborations among ADAS companies and fleet operators has boosted the market expansion. Moreover, the rise in number of fleet operators in several countries such as India, China, Japan, the U.S., Italy and some others coupled with deployment of EVs by ride-sharing companies to reduce emission is expected to foster the growth of the AI-based driving systems (L2 to L5) market.

Geographical Insights

Why North America dominated the AI-based Driving Systems (L2 to L5) Market in 2025?

North America led the AI-based driving systems (L2 to L5) market with a share of 36%. The growing popularity of autonomous vehicles in the U.S. and Canada has boosted the market expansion. Additionally, rapid investment by government for developing the road infrastructure coupled with increasing consumer awareness about the benefits of driverless cars is playing a vital role in shaping the industrial landscape. Moreover, the presence of numerous market players such as Qualcomm Technologies, Intel Corporation (Mobileye), Nvidia Corporation, Alphabet Inc. (Waymo) and some others is expected to drive the growth of the AI-based driving systems (L2 to L5) market in this region.

• In January 2025, Nvidia launched NVIDIA DRIVE AGX platform. NVIDIA DRIVE AGX platform is designed to enhance safety in autonomous vehicles.(Source: Nvidia)

U.S. dominated the market in this region. The rising adoption of driverless cars by fleet operators to earn maximum profits and enhance vehicular safety has driven the market expansion. Additionally, increasing cases of road accidents coupled with the presence of numerous automotive brands such as Tesla, Rivian, Ford, General Motors and some others is accelerating the industrial growth.

Asia Pacific is expected to expand with the highest CAGR during the forecast period. The increasing demand for luxury vehicles in several countries such as India, China, Japan, South Korea and some others has driven the market growth. Also, numerous government initiatives aimed at mandating ADAS in vehicles along with rapid adoption of driverless trucks in the mining sector is positively contributing to the industry. Moreover, the presence of various market players such as Hyundai Mobis, XPeng Motors (XNGP System), Huawei Technologies and some others is expected to boost the growth of the AI-based driving systems (L2 to L5) market in this region.

• In April 2025, Huawei launched a L3 Self-Driving System. This self-driving system is designed for the consumers of the APAC region.(Source: Yicaiglobal)

China and Japan are the prominent contributors in this region. In China, the market is generally driven by the rising production of BEVs coupled with rapid adoption of ADAS in commercial vehicles. In Japan, the growing demand for luxury sedans along with technological advancements in the automotive sector is playing a crucial role in shaping the industrial landscape. 

Industry Leader Announcement

• In May 2025, Antonio Polo, the Sr. Vice-President of Product and Business Development at LeddarTech made an announcement stating that, " Automotive companies face exponential challenges in the cost, complexity and scale of the data required to deploy safety-compliant and regulation-ready ADAS and AD systems at scale. LeddarSim brings the latest advances in AI-powered, multi-modal sensor dataset generation to recreate real-world driving scenarios with high fidelity. We believe LeddarSim fills a critical gap in the market. As the demand for simulation tools grows with the industry expected to surpass $4.6 billion by 2035 this solution is poised to help address the massive data and validation challenge. LeddarSim is available for trial evaluation and offers the flexibility to be used as a stand-alone tool or integrated within existing simulation toolchains."

Competitive Landscape

The AI-based driving systems (L2 to L5) market is a rapidly developing industry with the presence of several dominating players. Some of the prominent companies in this industry consists of Intel Corporation (Mobileye), Alphabet Inc. (Waymo), Baidu, Apollo, Tesla, Inc., NVIDIA Corporation, Huawei Technologies, Qualcomm Technologies, Aptiv PLC, Continental AG, Bosch Mobility Solutions, ZF Friedrichshafen AG, Uber ATG (Acquired by Aurora), Aurora Innovation, Cruise (GM), Pony.ai, Nuro Inc., AutoX, Valeo, Hyundai Mobis, XPeng Motors (XNGP System) and some others. These companies are constantly engaged in developing AI-based driving systems and adopting numerous strategies such as joint ventures, launches, partnerships, collaborations, business expansions, acquisitions, and some others to maintain their dominance in this industry.

• In July 2025, Baidu announced partnership with Uber. This partnership is done for launching robotaxis in the Middle East and Asia. (Source: Baidu)
• In May 2025, Waymo collaborated with Toyota. This collaboration is done for developing an AI-enabled autonomous driving platform.(Source: Toyota)

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• According to the annual report of Nvidia Corporation, the revenue of the company in 2023 was US$ 60922 million that increased to US$ 130497 million in 2024.(Source: Cloudfront)

Recent Developments

• In June 2025, Helm.AI launched a new self-driving technology. This technology is designed for Honda’s electric cars that will be launched in 2026.(Source: Indianexpress)
• In April 2025, Volkswagen Group launched AI-powered ADAS system. This ADAS solution is designed for the autonomous cars of China.(Source: Volkswagen Group)
• In April 2025, Nissan announced to launch a new autonomous technology in 2027. This new technology is integrated with Wayve AI Driver software to enhance autonomous driving.(Source: Nissan)

AI-Based Driving Systems (L2 to L5) Market Key Players

• Tesla, Inc.
• NVIDIA Corporation
• Intel Corporation (Mobileye)
• Alphabet Inc. (Waymo)
• Aptiv PLC
• Continental AG
• Bosch Mobility Solutions
• ZF Friedrichshafen AG
• Uber ATG (Acquired by Aurora)
• Aurora Innovation
• Cruise (GM)
• Pony.ai
• Nuro Inc.
• AutoX
• Valeo
• Hyundai Mobis
• XPeng Motors (XNGP System)
• Baidu Apollo
• Huawei Technologies
• Qualcomm Technologies

AI-Based Driving Systems (L2 to L5) Market Segments

By Automation Level

• Level 2 (Partial Automation)
• Level 3 (Conditional Automation)
• Level 4 (High Automation)
• Level 5 (Full Automation)

By Component

• AI Hardware (Chips, GPUs, ASICs, FPGAs)
• Software (Perception, Planning, Control Algorithms)
• Sensors (LiDAR, Radar, Cameras, Ultrasonic Sensors)
• Connectivity Modules (V2X, 5G, Edge Devices)

By Vehicle Type

• Passenger Vehicles
• Commercial Vehicles
• Robo-Taxis / Autonomous Shuttles

By Propulsion Type

• Internal Combustion Engine (ICE)
• Electric Vehicles (EVs)
• Battery Electric Vehicles (BEVs)
• Plug-in Hybrid Electric Vehicles (PHEVs)

By End User

• OEMs
• Tech Providers / AI Startups
• Fleet Operators
• Mobility-as-a-Service (MaaS) Companies
• Logistics & Delivery Companies

By Region

• North America
• Latin America
• Western Europe
• Eastern Europe
• Asia Pacific
• The Middle East and Africa