In-Vehicle AR/VR: Market Growth & Opportunities

The Expanding Role of Augmented and Virtual Reality in the Automotive Industry

For years, augmented reality (AR) and virtual reality (VR) technologies have found applications in sectors like gaming, design, and retail. Currently, a new competitive landscape is developing – within the automotive sphere.

New Opportunities with Safety Glass

Safety-glass windshields are presenting a novel avenue for suppliers, manufacturers, and emerging companies to integrate these technologies. AR functions by superimposing digital information or imagery onto a user’s view of the real world. Conversely, VR constructs an immersive, interactive experience that responds to the user’s movements.

Challenges to Monetization

Despite the potential, several factors hinder the monetization of AR/VR in this context. The lengthy and costly processes involved in developing, tooling, and rigorously testing automotive-grade products have limited progress to a select group of startups and established large-scale suppliers.

Market Demand Uncertainty

A clear understanding of market demand for AR and VR integration in cars, trucks, and vans remains elusive. Market size estimations vary considerably, ranging from $14 billion by 2027 to as high as $673 billion by 2025. This broad spectrum highlights the market’s immaturity and the significant opportunities it holds.

A Shift in Automotive Focus

“Vehicle manufacturers are experiencing a fundamental change in their product focus, shifting towards the end-user,” explains Andy Travers, CEO of Ceres, a Scottish firm specializing in holographic glass for AR applications. “This shift creates a new paradigm for what a car represents.”

Travers continues, “There’s substantial interest in AR and transparent displays because engine size is no longer a primary differentiator, particularly with the rise of electric vehicles. These vehicles are becoming standardized platforms. Consequently, differentiation will depend on the user experience.”

Slow Implementation and Stringent Requirements

The adoption of automotive AR – and, to a lesser extent, VR – is expected to be gradual, trailing behind the broader AR/VR market. This is due to the demanding requirements of vehicle systems.

Specifically, components powering AR and VR functionalities must withstand extreme temperature fluctuations, significant vibrations, and potential impacts over an extended lifespan of three to ten years. Even with claims that long-term component durability is economically unfeasible, these systems must demonstrate exceptional resilience.

Power Efficiency and Compact Design

These systems also need to be both compact and energy-efficient, especially as electric vehicle adoption increases. Excessive power consumption by AR or VR systems could lead to battery depletion and vehicle immobilization.

Historical Precedent: Touchscreen Adoption

The automotive technology landscape differs significantly from the consumer electronics sector. The slow adoption of touchscreens provides a relevant example. While Buick introduced a basic touchscreen in its 1986 Riviera, widespread usability only arrived with the introduction of the iPhone.

This delay was partly attributable to the three-to-seven-year product cycles common in the automotive industry and the technology’s initial unfamiliarity to consumers, hindering profitable widespread adoption. Currently, AR and VR are experiencing greater success in industrial applications, largely due to their high cost.

The Role of Autonomous Driving

The development of autonomous driving technology is inextricably linked to the conversation surrounding AR and VR. These technologies are crucial for the advancement of fully autonomous vehicles, despite the fact that no such vehicles are currently available for public use. Automakers are actively working to move these technologies beyond the conceptual stage.

Key Industry Participants

Several prominent automotive manufacturers, including Audi, Mercedes-Benz, and Volkswagen, currently integrate a range of Augmented Reality (AR) functionalities into their premium vehicle models.

Leading automotive component suppliers – such as Continental, Denso, Visteon, ZF, Nvidia, Bosch, and Panasonic – represent the primary forces driving innovation in the AR and Virtual Reality (VR) automotive sector. These companies specialize in the production and supply of Head-Up Displays (HUDs) and associated components to major automakers.

Current Applications of AR and VR

The majority of AR implementations within vehicles presently concentrate on projecting navigational cues onto the driver’s view, derived from camera feeds. This assists drivers in navigating unfamiliar areas and identifying specific locations or landmarks.

To date, VR technology has largely been utilized in the areas of vehicle design, sales presentations, consumer demonstrations, and educational programs related to new vehicle technologies. However, companies like Holoride, originating as an Audi spin-off, are actively developing VR experiences designed to mitigate motion sickness during travel while providing gaming, entertainment, and business applications for passengers.

Even ride-sharing services are exploring the potential of AR and VR, with Lyft and Uber investigating options to enhance the rider experience through these technologies.

Emerging Companies and Partnerships

Alongside established players, several startups are vying for a portion of the market. Ceres, for example, focuses on the development of specialized holographic glass.

Envisics, a U.K.-based company specializing in 3D holographic HUDs, has formed a strategic partnership with Panasonic Automotive Systems. This collaboration aims to jointly develop and bring to market a new generation of HUDs suitable for cars, trucks, and SUVs.

Envisics’ technology is slated for integration into the upcoming Cadillac Lyriq electric vehicle.

Investment and Future Development

WayRay, a company backed by investors including Alibaba and Porsche, is also making strides in the field. While WayRay’s technology is not yet featured in production vehicles, Porsche has indicated ongoing collaboration on several development projects.

Porsche believes in the potential of WayRay’s AR HUD technology for its sports car lineup, though integration into production models is not currently planned in the immediate future.

Investment Landscape in Automotive AR/VR

Leading investment activity is primarily driven by established automotive manufacturers. These include GM Ventures, Hyundai Mobis, SAIC Motor, BMW iVentures, M&A Tech Invest (affiliated with Daimler), Porsche, and Honda Strategic Venturing, all demonstrating interest in augmented and virtual reality applications within vehicles.

Independent venture capital firms are relatively scarce in this sector. This is largely attributable to the significant challenges and high costs associated with entering the automotive industry.

While numerous VCs are actively funding VR and AR solutions for automotive retail and self-driving technologies, direct investment in companies focused on in-cabin AR and VR experiences for drivers and passengers is less common.

The development of these in-cabin experiences is predominantly undertaken by the major Original Equipment Manufacturers (OEMs) themselves.

Key Observations

• The automotive industry is heavily involved in funding AR/VR development.
• Independent VC participation is limited due to high barriers to entry.
• Focus areas for VC investment include retail experiences and autonomous driving.
• In-cabin AR/VR development is largely controlled by established automakers.

AR and VR technologies are gaining traction within the automotive sector, but the investment landscape is distinctly shaped by the involvement of the established players.

The Evolving Role of Augmented Reality in Automobiles

Leading automotive manufacturers, including Mercedes, are now integrating 3D displays into their premium vehicles. These systems provide features ranging from dynamic lane guidance to real-time navigation with clear destination highlighting. Audi has also presented conceptual designs, such as adaptable head-up displays (HUDs) that can be adjusted for optimal viewing.

Despite numerous online demonstrations depicting a completely immersive in-car AR experience – where drivers can simultaneously view the real world and an AR overlay from any vantage point – this level of technology remains unrealized. According to Ceres’ Travers, fundamental physical limitations prevent its development.

Travers emphasized that “the laws of physics simply cannot be altered.”

The application of in-car virtual reality will likely remain restricted to passenger entertainment, contingent upon the widespread adoption of fully autonomous vehicles (Level 5). However, continued expansion is anticipated in the automotive retail and purchasing process. Furthermore, increased utilization is expected within industrial sectors for technician training, troubleshooting, and vehicle design.

Conversely, augmented reality is currently being implemented in consumer vehicles.

The immediate future of in-vehicle AR focuses on three-dimensional visuals, user personalization, and minimizing driver distraction while maximizing engagement. A key objective is to enhance the customizability of AR technology beyond its current capabilities.

Present systems are constrained by limitations in display technology, power consumption, and the projection surface – typically specialized glass or overlays. Achieving a balance between the demands of driving and minimizing driver distraction requires innovative solutions. Larger, customizable displays, mirroring the personalization options available on smartphones, represent a likely progression for in-car AR.

As in-car AR experiences become commonplace, the potential for in-display advertising emerges.

“The central question becomes: who controls the driver’s attention?” Travers posited. Consider a scenario where a driver passes a hotel offering a discounted rate or a restaurant advertising a daily special. Through their vehicle’s AR system, they could access reviews, details, and even make reservations or bookings directly. This presents a significant revenue opportunity for various stakeholders, including automakers, provided they can monetize this functionality while maintaining driver safety.

Innovations in both AR and VR within the automotive industry will be largely driven by consumer desires and expectations, mirroring the trend of in-vehicle smartphone integration.

Consequently, major automotive companies will continue to invest in, and acquire, smaller firms specializing in key components of AR and VR systems. These components include specialized screens and windshields, computing units, GPS technology, projectors, driver monitoring systems, and content creation. While driving with VR headsets is unlikely in the near future, in-car AR is already transforming the driving experience and is poised for continued evolution.