1. Introduction

Most of the major industries including the automotive industry are implementing modern technologies for better driving and traveling experience. Augmented reality and virtual reality (AR & VR) technology are at the forefront of creating this change and bringing human imagination to life. Among all the sectors, the automotive sector accounted for the largest investment in AR and VR technologies. According to our study, the global market for automotive will reach USD 600 Bn by 2025. In June 2022, according to “The Times of India”, the automotive AR & VR market accounted for $5.1 Bn in 2021 and is expected to further grow at a CAGR Of 32% over the forecast period, 2022 to 2025. The high growth rate in the development of AR VR technology has made the overall technology cheaper. This enables automotive OEMs and aftermarket equipment manufacturers to experiment and develop a wide range of applications of AR and VR in automotive. Some of the major automotive manufacturers like Porsche, Chrysler, Hyundai, Mitsubishi, and Tesla have already adopted the application of AR VR for different stages of vehicle manufacturing and selling. In 2018, Tesla patinated an AR-based system to enhance faster vehicle production and maintain higher consistency in their products. AR-based head-up display (HUD) segment is expected to hold the largest share of AR & VR in the Automotive market till 2026. Most of the latest vehicles launched in the last six months have offered a head-up display in their vehicles. Sensor fusion has also emerged as a key technology for semi-autonomous and autonomous vehicles. This ensures data accuracy for safety apps in the vehicles. The fast growth of advanced displays like AMOLED and OLED displays is expected to drive the demand for AR and VR in the automotive industry.

Some of the key factors driving the AR and VR in automotive industry include 

•Growing adoption of latest technologies by vehicle manufacturers in various manufacturing pre- and post-sale stages
•Growing demand for safety inside the vehicle based on novel legislation and standards
•Growing popularity of connected cars
•Faster generation of real-time data from ADAS (driver assistance systems) 
The AR & VR in automotive industry accounted for $5.1 Bn, in 2021 and is expected to reach $20.1 Bn by in 2025. The market is expected to growth at a CAGR of 32%, during 2021 to 2025.

The AR & VR in automotive industry accounted for $5.1 Bn, in 2021 and is expected to reach $20.1 Bn by in 2025. The market is expected to growth at a CAGR of 32%, during 2021 to 2025.

2. Virtual reality (VR) 

VR is the simulated experience of a real-world situation or a fantasy situation. The virtual reality technology used in automotive sector is mostly provided with the help of multi-projected environment or virtual reality headsets which produce sound, natural images and other sensations which simulates the physical presence in a virtual environment. Traditionally the virtual reality used to comprise of video and auditory feedback. However, the technology is evolving at a rapid pace and now also using force and sensory feedback with the help of haptic technology. 

The application of AR and VR has really stretched human imagination, like for example traditionally when a check-light is flashing on the dashboard, the driver’s response is generally to look through the manual or it need to get in touch with the mechanic or ignore it. However, with the help of AR automotive OEM has made it possible for the vehicle owner to scan the barcode showing on the dashboard and get a precious answer as to what exactly went wrong. This is achieved with the help of AR which enables augmenting real-world experience with the application of graphics and data. Augmented reality provides a wide array of opportunities at every level of the value chain in the automotive sector. Augmented reality in the automotive sector finds application in the inventory, manufacturing, assists technicians for vehicle maintenance and enhance the overall driving experience. According to the study, VR accounted for $1.2 Bn and is expected to reach $8.3 Bn, in 2026.

The VR in automotives industry accounted for $1.2 Bn, 2021 and is expected to reach $8.3 Bn, in 2026. The technology is expected to grow at a CAGR of 38.03%, during 2022 to 2026.

2.1. How Virtual Reality is Driving the Growth in Automotive Sector 

2.1.1. Training Engineers 

Virtual reality is used by many automotive OEMs to train engineers in the automotive sector. Most automotive manufacturers make the application of an observation-based approach for training their workers to assemble a specific car model. These workers are then made to go thorough theoretical training process. They are then put to assist experts for on-the-job training. This is stage where the workers or engineers are bound to make mistakes and damage the end product. Virtual reality allows workers or engineers working in the automotive plants to learn virtually and make mistake at a virtual platform, which won’t affect the final product. Further, with the help of virtual reality the overall training becomes a lot more efficient and reduces production errors considerably. Moreover, working with heavy parts like engine, axil, chassis of the vehicle involves a lot of risk for the engineer to get hurt. Virtual reality helps safely putting assembly specialists into nearly any dangerous situation and teaching them how to behave properly under stress and life threats.

2.1.2. Learning How to Drive with the help of Virtual Reality

VR integrated driving simulation are fast growing in popularity. In 2022, World Health Organisation cautions that by 2030, road accidents will be the 5th leading cause of death across the world. This is primarily attributed to leniency in driving tests especially in developing countries and issue of licence to people. Therefore, to test drivers with new driving licence in though driving conditions especially in terms of road congestion, many organisations are employing VR driving simulators. Providing opportunity for new drivers is an experience in driving and educating them on road safety precautions. Equipped with large computer monitors, steering wheel, and car seats, the VR simulators replicate the dangerous experience of driving while distracted (by a phone, eating, etc.). Participants leave the simulation better understanding what it means to be distracted whilst driving, and learn about the increased risk of crashing when not paying full attention to the road. Teen D.R.I.V.E is one such initiative letting students in high school experience the hassles of driving how to maintain safety both for pedestrians and other vehicles. 
Virtual reality can train learners to be proficient enough to spot potential risks on the road and how to avoid them. Further, many people in developed countries are not able to clear there driving test in the first few attempts. They can now push themselves to practice driving with the help of a VR and improve their driving to a point where they will be able to clear the test. 
Some of the most popular VR enabled driving training system include - Teen Drive 365

Toyota and Oculus partnered in developing the most advanced simulator that helps people to learn out to drive. This is application of the system people get an immersive experience while riding a car and interacting with the environment within the simulator. Oculus has made the simulator while Toyota designed the software and hardware required to develop the Teen Drive 365. The system educates people on how to deal with road conditions, noise, pedestrians, and traffic. Motion Pro 2

The CXC and Oculus jointly developed the racing simulator game Motion Pro 2. This simulator helps people learn techniques to race on tracks and also helps racers to practice a track virtually before practicing on the real-life track. Moreover, if you are a new driver, they can learn tactics to handle the car in sharp corners. Basically, memorize the track and develop strategies as on where to break or accelerate. There are many more popular racing stimulators like project cars, Asseto Corsa, Dirt Rally, Live for Speed and iRacing. VR Car Driving Simulator

VR car driving simulator is an application developed by Apple. The app is compatible with google VR cardboard and other VR headsets available. The application simulates real life world for driving with sharp road bumps, sharp turns and other challenges faced by a regular driver. This teaches person who is learning how drive how to manage wider range of situations. To make the experience more real the app also has dashboard on the screen. Goodyear’s VR Driving Academy App

Goodyear offers VR driving academy app, this is a part of the company’s driver training program. The leaner can chose driving situation in this app and there will be distractions which the learner needs to tackle. There could be a wide range of distractions ranging from text messages, external distractions like pedestrians walking, music and horn sound from other vehicles as well. The app is also being used by DIA (Driving Instructors Association). Testing of Autonomous Vehicles 

At present autonomous vehicles cannot be tested without an actual person present inside the vehicle. This person is required to ensure the safety of pedestrians and other vehicles who are present on the road. VR connected to testing software makes it possible to test the vehicle without an actual person present in it. Self-driven car testing based on VR technology also helps in avoiding the fuel expense. Traffic simulation provides 100% safety for the vehicle in getting damaged, as the vehicle is now run through a simulation and not in the actual world. The virtual reality created for the vehicle testing allows the vehicle to make new mistakes and then be programmed accordingly to avoid coalition in the real world when the vehicle is faced with a similar situation. Virtual reality further allows car makers to test their car for any terrain and will not be affected by the real-world weather or road conditions. The immersive technology can help vendors to ensure a high safety level for their autonomous vehicles with lower costs and reduced time. Prototyping with the help of VR technology

Automakers have to first develop a concept version of any vehicle and run a number of test before it can be finalised as a production model. The concept vehicle helps in improving the design, safety of the passengers and enhancing the overall performance of the vehicle. However, this is a very expensive process and involves a lot of investment and time consuming. Now the automakers can make a virtual prototype using virtual reality. The auto makes can create a digital twin of vehicles and offer a lot of flexibility in make fine tunes, modifying concepts and experiment with the design and cut down on the cost of development at the same time. Further, developing a concept car in VR enables the auto developers to conceptualize the finished product better before the product model is finalized. Ford is already using VR to prototype to develop its next generation of vehicles. The road ahead for VR in the automotive sector

Safety standards, changing customer expectations with high competition in the automotive industry has forced the automotive OEMs to experiment AR & VR technologies. The application of VR will enable vehicle manufactures to build safer vehicle for the future. The VR is a break though technology for the automotive industry and there is limitless possibility to what this technology can provide for the automotive industry.

3. Augmented reality (AR) 

AR is a communicating experience of a real object from the real-world environment where the objects that present in the real world are enhanced with the help of computer-generated perceived information. This might be across multiple sensory modalities, which include visual, auditory, olfactory, haptic, and somatosensory. Further, AR is defined as a module which incorporates three major factors including combination virtual world and real worlds, accurate 3D registration of virtual and real objects real-time interaction. The overlapping sensory information could be constructive. This can additive to the natural environment, or destructive which may result in masking of the natural environment. This experience is seamlessly interwoven with the real world such that it is perceived as a immersive aspect of the real environment. In this way, augmented reality alters one's ongoing perception of a real-world environment. According to DATAinteleo, AR in Automotives accounted for $0.6 Bn, in 2019 and is expected to reach $2.8 Bn by 2026. 
AR in Automotive industry is expected to USD 10 Bn by 2026 according to DATAinteleo.

The AR in automotive industry accounted for $2.1 Bn in 2019 and is expected to reach $13.5 Bn by 2026. The market is expected to grow at a CAGR of 36.31%, during 2020 to 2026. 

3.1. How Augmented Reality is Driving the Growth in Automotive Sector

AR is enhancing multiple solution which include haptic, auditory, visual, olfactory and somatosensory. At present in the automotive sector various form of visual augmented reality, glasses or screen are used. This helps in creating a wide range of head-up displays applications. Markers and sensors make it possible to have 3D embedded models into digital world: 
1.Markers: These are used to merge virtual and real-world environments, by making it on a camera which extracts data from markets like QR codes, images and physical objects. AR is used in a wide range of application in the automotive sector which includes retrieving car parts in warehouse. 
2.Sensors: The sensor-based solutions depend on the exact camera position which is related to a real-world object. A wide range of technologies which include Wi-Fi, GPS, RFIDs are used in defining the location. Seniors’ plays an important part in modules which are related to the safety. AR assisted dashboard which helping controlling the road surroundings and conditions 

3.2.Some examples of real-life application of AR in automotive solutions are discussed below: 

3.2.1.Enhanced Driving Experience

A present two of the key factors driving the automotive industry is the stringent safety standards lived by governments and motor vehicles agencies across the globe. Further, the ever-growing need for luxury and comfort propels the automotive market. Further, the industry 4.0 additionally add consideration and sustainability of future impact. There it has almost become a nasality for automotive OEMs to keep innovating at a year-on-year basis. This is also making modern day vehicles more sophisticated and complex. Latest cars incorporate, dozens of sensors, multiple cameras, microprocessors and close to a 100 million codes. Moreover, the latest range of connected cars are required to be connected to a cloud server and make vehicles marvels on wheels. Augmented reality is used to enhance the infotainment systems and improve navigation and overall safety of the vehicle. AR can be used to augment adaptive cruise control, navigation and lane departure warning. Further, AR is used for AR assisted real time street signs, dashboard systems, impact warning and street signs. This is a resulted in a wide range of real time information about its environment through augmented reality that makes a drive safer and comfortable. 

3.2.2.Example of 3D-powered Augmented Reality Interface

Automotive OEM stalwart Nissan introduced the invisible to visible technology (I2V). This technology help in creating a 3D space around the vehicle. It uses an AR enabled interface, which helps drivers with real-time make manual and road data navigation assistance. Also, data collected from the sensors used for AR also provides intimation of unforeseen traffic situations & Benefits. 

The application of augmented reality helps in automotive setting advance driving experience that includes 
• Improved product quality which builds solutions which enhance navigation, entertainment, comfort for providing better services for customers.
• AR enables latest features for the automotive OEMs, which in turn helps the key players in gaining competitive advantage over other players operating in the market. 
• Increases sales, providing top-notch functionality in line with the latest tech trends

3.2.3.Car Manuals 

A key application of augmented reality in the automotive sector is its application in showrooms. AR is used by the salesmen for displaying the features of a vehicle with the help of smart devices and headsets. The technology helps in visualisation of a wide range of overlapping information. This overlapping information would include exterior parts, image, interior images, weight, performance and financing. Further, the information can be presented in an interactive way which can be updated over the air and in real time. AR powered instruction and guides can replace traditional complex manuals. This augmented reality powered manuals provide information on maintenance, vehicle features and information on repair with the help of smartphone tablet. 
Augmented reality applications used in showrooms help salespeople show car functionality with the help of a headset or smartphone camera. The technology allows for a visualization of lots of overlapping information, such as interior and exterior parts, performance, weight, and financing. It’s possible to present this data in an interactive way and keep it up to date on the go.
AR-powered guides and instructions easily replace long and complex manuals. Manual applications provide car owners with access to vehicle features, maintenance, and information for repairs via smartphone or tablet.
AR-powered virtual guide app from Hyundai is a vivid example. At first, the application appeared to recognize about fifty vehicle features of the 2015 and 2016 Sonata. Today, it supports Genesis luxury sedans that use augmented reality. With this guide, consumers get how-to information for repairs, maintenance, and vehicle exterior and engine parts. 2D and 3D tracking technologies allow the delivery of in-depth information related to specific parts. Some of the key benefits of application of Augmented reality auto manuals include cost saving demonstrations, which are more efficient in showrooms and for sales people. Also helps in creating a better brand awareness and educate the customers about the features in the vehicle. Enabling enhanced services for customers with the help of interactive manuals limits the customer to visit a service centre for minor issues. The AR enables a more efficient repair and diagnosis process. 

3.2.4.Heads Up Display (HUD)

The heads-up display is a latest driver assistance system which involves the projection of real-time information that helps the driver to stay focused on the road and not take its eyes of it. The data is projected on the windshield, it can consist of a wide range of information which include engine check light, speed, navigation, warning signals and more. Most automotive OEMs are offering this feature in their top models. However, according to experts there could be a wide range of applications which are yet to be explored. In January 2021, Hyundai introduced the first Holographic AR Navigation System which the company has developed in partnership with WayRay Company. Most of the latest car launches are coming with preinstalled HUD from the manufacturer’s end. In March 2021, Audi announced its plan to launch its electric luxury SUV AUDI Q5 in the last quarter of 2022. The vehicle will have AR enabled HUD system with a flying arrow that will be part of the navigation system. In June 2022, Li Auto announced the launch of its new L9 in the same month. They further announced that the vehicle will have an interactive heads-up display on the front wind shield and it will be interactive. In July 2022, Maruti Suzuki launched new Brezza car, which comes with a pre-installed heads-up display.

4. Combination of AR & VR in the Automotive Industry

Augmented reality and virtual reality do not work independently, rather it is a combination of the two technologies. A mix to provide an absorbed experience. The key players in the automotive industry are primarily focusing in AR and VR. This has revolutionized the process to develop and create spare parts. Automotive OEMs will continue to automate day to day responsibilities. The technicians are domineering in operating artificial intelligence and operating robots. The application of AR and VR will be authoritative in operating artificial intelligence and robots. However, there are still some challenges in the application of AR and VR technologies in the automotive industry. 

Virtual reality and augmented reality are great examples of experiences and interactions inspired by the desire to be immersed in the customized land for entertainment and sports, or to add a new dimension of interaction between digital devices and real world. Together alone or mixed, they are undoubtedly opening up the world - both real and virtual equally.

4.1.Example of Car manufacturing using AR & VR


The company uses AR & VR at the time of designing to view and evaluate prototypes before they finalize the production version of a particular model. This helps them make sure that the vehicle is abiding all the latest international norms. This process helps BMW to speed up the entire process of launching a new vehicle to the market and gain competitive advantage over other car manufacturing companies across the globe.
Further, the company has an app which allows customers to experience and test the BMW 7 Series models. This app also comes with informative videos and interactive images which enlightens the true potentials of the vehicle. Customers are able to use the radio, open the doors, and check the internal parts of the car virtually. The application of AR VR also enables the customers to virtually configure and customize the car to their needs and the propose the same customization in their vehicle.


The company is making the application of AR & VR in their workshop to address a wide range of technical problems with consistent results. The engineers working for the company can use VR glasses and reach out to more experience personnel for help. Maintenance staff are able to make better decisions by consulting with in-experience technicians to conclude on the best solutions for address errors. In 2020, the company announced that they have tripled the application of AR & VR in various stages of their operations.


The company created an app which engineers, designers and safety experts can use to experience the vehicle for the view point of a taller and shorter driver to make sure enhance driver comfort. 
The company further makes application of AR & VR app to let customers experience there vehicles remotely. The customer can now open the doors, remotely experience the interior of the vehicle and listen or experience the ambience of the vehicle virtually. The company aims to increase its sales by giving the it’s potential buyers an immersive experience. Further, in the post sales stage the company is making the application of AR to improve and enable repair processes. 


In 2020, the company announced that potential buyers can use AR to experience their new car models. Customers can also see how the vehicles are expected to look in real life and check the details in high definition. Further, the customers can use the app to make customisations to their vehicle at dealer points.

5. Competitive Analysis of the AR VR in the automotive industry: 

Some of the key players providing AR and VR in the automotive industry as on 2022 include: 


Core services and projects



Revenue (2022)


AR/VR app development, Creation of location-based and marker-based AR apps. Design of highly-realistic 3D models. Computer vision algorithm development. Large-scale VR software and XR solution implementation.



$30 M


AR & VR development, Developing mix reality experience for the automotive sector



$100 M+


AR and AI

Lewes, Delaware, USA.


$4 Million


VR studio

Chicago, USA


$9.3 Million


Game and app development.

Bielsko-biala, Slaskie, Poland


Not disclosed


VR headset manufacturing and platform development.

Washington, USA


$143 Billion

VR for automotive platforms


Development of mobile applications, web-oriented applications, business software solutions, as well as software integration and updating, support and maintenance of software applications.

San Francisco, California

22 employees

$17.60 Million

VR Vision Inc.

AR/VR experiences, apps, mobile and web apps

Toronto, Canada


$12 Million

Groove Jones

VR studio.

Dallas, Chicago, USA


$10.3 Million


AR/VR/MXR or mixed reality experiences and apps.

Seattle, Washington

01-11-1950 00:00

Not disclosed

Gravity Jack

AR development, 360 degree/VR development for automotive applications

Liberty Lake Washington.


Not disclosed.


AR-based remote assistance and diagnosis for automotive applications

Herzliya, Illinois in USA


$10 Million

6. Conclusion

AR and VR itself are still relatively new technology and the penetration for the same has just started in the automotive industry. Both the technologies have a lot of growth opportunity in the industry. New apps are regularly being developed to enhance the driver and passenger experience inside the vehicle. AR and VR are being used right from the production process to providing customers an ideal experience whilst selecting the vehicle which is perfect for them, to customizing the vehicle to there needs. All the key players operating should look to invest in the AR and VR technology or they will lose competitive advantage over other players operating in the market. AR and VR is the way forward for the automotive industry.   

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Mr. Venkat Reddy
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About IndustryARC: IndustryARC is a Research and Consulting Firm that publishes more than 500 reports annually, in various industries such as Agriculture, Automotive, Automation & Instrumentation, Chemicals and Materials, Energy and Power, Electronics, Food and Beverages, Information Technology, and Life sciences and Healthcare.