Not an automotive developer but I've done quite a bit of embedded stuff that was placed in/on various items including cars. Yes, it is that tight. You're in a sealed container under the hood of a car, the ambient temperatures can be quite high and you're not going to be able to dump any of the heat you generate outside of the box you're in other than through conduction. Those boxes are typically made of ABS so conduction will be terrible.
Of course you could re-design the enclosures, have a heatsink mount point on the outside (some expensive trickery required to do that without breaking the sealed environment), or even an air duct that would allow you to use a fan (but fans tend to fail).
So I can totally see why the constraint on power consumption for such an embedded system would be so drastic.
