The paper discusses incorporating Kaizen into Industry 4.0 tools to lead digital transformation and continuous improvement (CI) processes in the automotive industry. The background section covers the basics of Kaizen, which originates from the PDCA cycle, and digital transformation, providing the groundwork for how these two components can be used together synergistically. The research focuses on integrating Kaizen with key Industry 4.0 technologies such as Big Data, Virtual Simulation (VS), Cloud, and Augmented Reality (AR). The aim is to discover how these technologies can improve production processes, make better decisions, and stimulate innovation through data-driven insights. The findings and discussion emphasize how digital solutions can break through conventional obstacles to process improvement, particularly in automotive SMEs which are demonstrated with an example of case studies. Furthermore, the article analyses the challenges of the implementation of Kaizen 4.0 in SMEs, specifically the intricacies of technology integration and the requirement for innovation competences. Therefore, the conclusion has specified all the key outcomes of this research. The underlying future perspectives for research and practical applications in this field have also been presented.