Virtual Reality to Become Major Sales Tool for Vehicles
With automakers aiming to keep sales above 2015’s record-setting levels, they’re pulling out all the stops to attract buyers. Virtual reality may yet be the next big deal in their bag of tricks.
Audi has finalized plans to roll out Oculus Rift headsets in a number of dealerships by the end of this year. Johan de Nysschen, president of Cadillac, earlier this year, encouraged some of the company’s lowest-volume outlets to go virtual.
Benefits of VR to Automakers
With dealers all over the world already experimenting with virtual reality, automakers see dual benefits of the technology: it enhances the customer experience while also shaving off some of the $2.75 billion U.S. dealers currently spend annually on interest to keep new vehicles on their lots.
“You get a good feeling for the size — do the rims fit to the body of the car, do the colors inside the car fit well together?” he said. “You can judge this much better through this technology than on a screen.”
Giving customers the ability to virtually manipulate models, color schemes and features in a visual environment is automakers’ latest tool to distinguish themselves in a slower-growing yet very profitable market.
Automakers Mostly Doing Well Financially
April sales figures will most likely show gains for most of the biggest U.S. and Japanese automakers, as the annualized selling rate, adjusted for seasonal trends, rises to 17.5 million, according to a Bloomberg survey. The pace, along with the month’s total are projected to set April records.
“Top-line performance of the industry remains robust — retail demand is strong, transaction prices are at record levels and consumers will spend more on new vehicles than in any other April on record,” said John Humphrey, senior vice president of Global Automotive Practice at J.D. Power, in a statement. “The slowing rate of growth, shift in consumer demand away from cars and toward SUVs, and elevated fleet volumes pose significant challenges to manufacturers as they compete in the marketplace.”
Kurt McNeil, vice president of U.S. sales expects General Motors industry wide sales to rise 5 percent and a seasonally adjusted annualized pace of 17.5 million vehicles or higher.
While Ford, alongside others, have increased sales to fleet customers so far this year, GM has reduced them. Consequently, the Detroit-based automaker delivered record North American profits in the first quarter, even though U.S. sales slipped by a few hundred. Analysts project a 1.7 percent decline for GM in April.
“The economic fundamentals are there,” McNeil said. “Interest rates are still low and gasoline prices may be the lowest this summer since 2005.”
VR is already being used for promotion
Automakers already have some experience on the use of virtual reality to promote their vehicles. Fiat Chrysler Automobiles, in 2014, promoted the 2015 Chrysler 200 sedan by giving viewers a virtual reality tour of its factory.
Volvo Car Group, owned by Zhejiang Geely Holding Group Co., utilized the technology to introduce customers to its XC90 SUV before it became available in U.S. dealerships last year.
Toyota enticed visitors at this spring’s New York auto show, by letting them use headsets that demonstrated its cars’ safety features, including pedestrian detection.
Virtual reality has grown from a quirky concept to an almost-practical form of delivering entertainment and information as a result of improvements in image quality, computer bandwidth, and investment by companies like Facebook. Oculus VR Inc., which Facebook bought for $2 billion in 2014, launched its virtual reality headset for $599, while HTC Corp.’s HTC Vive, is priced at $799.
The Prospects of VR in the Automobile Industry
In the near future, the gaming industry will likely account for most of virtual reality’s, but according to Bloomberg Intelligence analyst, Jitendra Waral, it will become an important part of the consumer experience for a number of industries, including autos, health care and tourism in the next four to five years.
Sales tied to the headsets may top $1 billion mark this year and is projected to reach $21 billion by 2020, Waral estimates.
“What companies are doing is they’re creating these consumer touch points to differentiate themselves and be more competitive in terms of the experience,” he said in a phone interview. “It’s completely different than the way you do things right now, so that novelty is what grabs the attention.”