This paper discusses the changes in automotive electronics that drive the evolution to model-based design and virtual system prototyping. Virtual system prototyping, a method of modeling an electronic system using software models of the hardware that behave like the actual hardware, is contrasted with conventional hardware prototype-based methods. Other software-based modeling techniques also are discussed to clarify the requirements for an effective solution. Finally, virtual system prototyping is explored in depth and an example of an automotive safety system designed using a virtual system prototype is provided.