Automotive Augmented Reality & Virtual Reality Will Experience Exponential Growth

Both augmented reality and virtual reality technologies have exploded in popularity over the last several years. These technologies, which were once associated solely with gaming, are now branching out to other areas, including the automotive industry. In fact, the automotive segment of the augmented reality and virtual reality market is expected to experience significant growth within the next few years.

How are automotive companies using augmented reality and virtual reality technology? What is the forecast for the automotive augmented reality and virtual reality market? What factors will drive this segment of the market’s growth? Here’s what you need to know: 

How Are Augmented Reality and Virtual Reality Currently Used in the Automotive Industry?

The automotive industry has embraced both augmented and virtual reality technologies. These technologies are currently used in many different ways in the automotive industry, including:

  • Virtual Showrooms
  • Design
  • Repairs
  • Manufacturing
  • Car Features
Automotive Augmented Reality & Virtual Reality Will Experience Exponential Growth

Virtual Showrooms

Many auto dealers allow consumers to shop for a new car from the comfort of their own home inside a virtual showroom powered by virtual reality technology. 

Inside a virtual showroom, consumers can explore the interior and exterior of vehicles just like they would if they were standing in a real showroom. They can even rotate the vehicle to see it from every angle or adjust the settings to see what it would look like in a different color. 

This allows consumers to start the car buying process at home rather than in a dealership. Now, they can visit a virtual showroom to conduct research, compare different vehicles, and narrow down their options. Plus, they can enjoy the convenience of visiting a virtual showroom at any time. They are no longer restricted to only conducting car research during standard business hours. 

Virtual showrooms became increasingly popular during the COVID-19 pandemic since many consumers were hesitant to visit dealerships in-person. But due to their overwhelming popularity, experts believe that these showrooms will be around long after the pandemic is over.


A number of automotive manufacturers are currently using virtual reality technology to speed up the process of designing new vehicles. Automotive designers typically must create clay prototypes whenever they are designing a new vehicle. Every time a change is made to the design, they must create a new clay prototype to reflect the changes. This is time-consuming and expensive, which is why many manufacturers are now using virtual reality technology instead.

Now, automotive designers can build virtual models of new designs in a matter of hours rather than days or weeks. If a change is requested, the designers can quickly edit the virtual model instead of building a new clay prototype from scratch. This drastically reduces the time it takes to finalize designs and the cost of designing new vehicles.

Using virtual reality also allows teams to collaborate on new designs from across the globe. Once a virtual model has been created, the entire team can use virtual reality technology to enter the simulated environment, explore the design, and provide feedback.

Automotive Augmented Reality & Virtual Reality Will Experience Exponential Growth


Some automotive companies, including Mercedes-Benz, are using augmented reality technology to assist with automotive repairs

Mercedes-Benz auto technicians who need help making a repair can put on an augmented reality headset to connect with an automotive expert. Putting on the augmented reality headset allows the expert to see exactly what the technician sees. The expert can then use augmented reality technology to project digital elements onto the technician’s environment to assist with the repair.

For example, the expert might project a digital arrow onto a filter that needs to be replaced or a cap that needs to be tightened. The expert can then project other digital images to guide the technician through the steps they need to take to make the necessary repair.

Using augmented reality in this manner helps technicians quickly diagnose and address vehicle issues so customers won’t need to wait as long to get back on the road.


Augmented reality technology is also used in the vehicle manufacturing process. Thanks to augmented reality technology, assembly line workers won’t have to step off of the production line to find information on a specific vehicle, part, or process. Instead, they can put on an augmented reality headset to immediately access the information. 

For example, an assembly line worker who doesn’t remember how to put together a specific car part can use an augmented reality headset to project an instructional video or how-to guide directly onto their real world surroundings. This allows them to reference the instructions as many times as necessary while they are actually assembling the car part. 

They won’t need to spend hours flipping through an instruction manual to find the information they are looking for–all they need to do is slip on an augmented reality headset. 

Automotive Augmented Reality & Virtual Reality Will Experience Exponential Growth

Car Features

Augmented reality technology supports many in-car features found in vehicles on the market today, including navigational systems. These systems are designed to provide step-by-step directions to drivers to help them reach their final destination safely and as quickly as possible. 

Augmented reality is used to make the instructions easier to follow. For example, a digital arrow may appear on the navigation system’s screen to tell the driver when they are approaching the street they need to turn on.

Some vehicles are also designed with hazard detection systems supported by augmented reality technology. If the driver is approaching a hazard on the road, the system will project a digital element such as a blinking hazard light to alert them of the danger ahead. 

Rear-view cameras that help drivers safely back up their vehicles are also powered by augmented reality technology. These systems will project digital elements onto the live feed from the rear view camera to show drivers where their vehicle is headed. 

Automotive Augmented Reality and Virtual Reality Market Forecast

In 2020, the global augmented reality and virtual reality market was valued at $18.8 billion, which represented a 78% increase over 2019. Experts predict that the market will continue to grow over the next several years, eventually reaching a value of nearly $300 billion by the year 2025.

Some segments of the market will experience more growth than others. The automotive augmented reality and virtual reality segment, however, is expected to perform well. Experts predict that the automotive segment of this market will increase by $5.10 billion by 2025, at a compound annual growth rate (CAGR) of about 32%.

The automotive augmented reality and virtual reality market will grow all around the world, but right now, Europe is the global leader in the market. Experts believe that Europe will remain a dominant player in the market in the future. They predict that about 45% of this market’s growth will originate in European countries.

The automotive segment of the market is fairly concentrated among a handful of top players. But if the market continues to grow as expected, experts believe that new companies will enter the industry and compete with these major players. 

What Factors Will Drive Growth in the Automotive Augmented Reality and Virtual Reality Market?

Industry analysts believe that the growth in the automotive augmented reality and virtual reality market will be primarily driven by these key factors:

  • Shift to Online Automotive Sales
  • Virtual Events
  • Potential Benefits to Automotive Companies
Automotive Augmented Reality & Virtual Reality Will Experience Exponential Growth

Shift to Online Automotive Sales

In 2018, only 1% of automotive consumers said they purchased their vehicle online. But the concept of purchasing a vehicle online has become increasingly popular since then. By early last year, nearly one in 10 automotive consumers were purchasing vehicles online, and 63% of consumers said they would consider making their next vehicle purchase online instead of in a showroom.

This drastic shift to online automotive sales is one of the main factors that will drive growth in the automotive augmented reality and virtual reality market. To sell vehicles online, automotive companies need to use augmented reality and virtual reality to provide an at-home dealership experience. This includes giving consumers access to virtual showrooms and the opportunity to take virtual test drives.

Automotive companies must invest in these technologies now in order to keep up with the competition and reach these online consumers. 

Virtual Events

Experts believe that the increase in demand for virtual events will also drive growth in the automotive augmented reality and virtual reality market. 

The COVID-19 pandemic forced many automotive manufacturers to host virtual auto shows rather than in-person events. Using virtual reality technology, a consumer can attend these auto shows, explore vehicles, and participate in other fun activities without ever stepping foot outside of their home. Because virtual reality creates a fully immersive experience, the consumer will feel as if they are really attending an in-person auto show.

Although this trend was sparked by the COVID-19 pandemic, it is expected to continue in the future. This is primarily because it is less expensive than hosting an in-person show and it allows automotive manufacturers to reach a wider audience, which is especially important to manufacturers who are hosting these events to launch new vehicles.

Potential Benefits to Automotive Companies

Automotive companies benefit from using virtual reality and augmented reality technologies. Using virtual reality to design vehicles, for example, can save automotive manufacturers thousands of dollars . Using augmented reality in the manufacturing process can improve productivity, which also benefits the manufacturer.

Virtual showrooms can save automotive companies money, too. If consumers visit an online showroom, they won’t need to visit an in-person showroom, which means auto dealers won’t need to keep as many vehicles in their showrooms. As a result, auto dealers won’t need to cover the costs of transporting and maintaining as many vehicles. They may also be able to downsize to a smaller property, which will drastically reduce their operating expenses. 

The potential savings are too great for automotive companies to ignore, so this factor will most certainly drive a great deal of growth in this market. 

What Challenges Will the Automotive Augmented Reality and Virtual Reality Market Face?

Most experts agree that the automotive augmented reality and virtual reality market will grow exponentially over the next few years, but the market could encounter a few challenges along the way, including:

  • Slowdown in Automotive Industry
  • Adoption of New Technology
Automotive Augmented Reality & Virtual Reality Will Experience Exponential Growth

Slowdown in the Automotive Industry

One of the main challenges that the automotive augmented reality and virtual reality market will face is a slowdown in the automotive industry. 

The automotive industry was hit hard by the COVID-19 pandemic. In 2020, automotive sales in the U.S. declined by about 15%, which represented the fourth-largest annual decline in sales since 1980.

However, the automotive industry was starting to slow down long before the COVID-19 pandemic occurred. In 2018, the automotive industry represented approximately 20% of the slowdown in GDP and roughly 30% of the slowdown in global trade

The slowdown has been largely attributed to the fact that many markets have reached maximum automobile saturation. Furthermore, many consumers rely on ride-sharing services or public transportation, which they may find more affordable or convenient than owning their own vehicle. 

Some industry experts believe that the automotive industry will start to slowly recover from the effects of the pandemic this year. However, if the pre-pandemic slowdown continues, this could negatively impact the automotive augmented reality and virtual reality market’s growth.

Adoption of New Technology

The automotive industry could also struggle to get consumers to adopt these technologies, which could hinder the growth of the automotive augmented reality and virtual reality market segment.

According to a survey conducted in 2019, only 30% of consumers have experienced augmented reality technology and only 11% of consumers own a virtual reality headset. These statistics indicate that many consumers might not be familiar with what virtual and augmented reality technology are or how they work. Because these technologies are typically associated with the gaming industry, consumers may not understand why or how they could be used in the automotive industry. 

For example, consumers may not understand the benefits of using augmented or virtual reality technology to shop for a vehicle online. It’s up to automotive companies to overcome this obstacle by educating consumers to ensure they understand how using these technologies could make the car buying process faster and more convenient.

Although overcoming these challenges won’t be easy, they shouldn’t stop the automotive augmented reality and virtual reality market from experiencing exponential growth in the years ahead.