Virtual Reality to Enhance, Not Eradicate, Car Buying

LAS VEGAS – You’re checking out the interior of a new car. The console is high-tech and looks great, the leather seats are stylish. You turn around to check out the back seat. It looks roomy. You reach out to see how the leather on the steering wheel feels and grab … nothing. That’s because you’re sitting in a virtual vehicle.

Virtual-showroom technology is in its infancy, but companies are betting it will revolutionize the vehicle-shopping experience. They haven’t exactly figured out how the virtual showroom and the traditional dealership will interact, but they are confident it is the future of auto retailing.

“Dealers are trying to shorten the buying cycle and take it online,” Tej Soni, president of Izmo, tells WardsAuto. “We are part of this discovery.”

San Francisco-based Izmo started out providing the 360-degree vehicle spins you find on manufacturers’ websites, and moving into the virtual showroom was a natural progression, Soni says.

Interest in its virtual-reality technology, which includes allowing virtual test drives, has come mostly from manufacturers and agencies, he says. It isn’t working with dealerships yet. “It is totally new,” says Soni. “We don’t know how usage will emerge.”

But Izmo sees it as the perfect way to deliver content on future models to, say a customer waiting in the service area, says David Vespremi, Izmo’s director of marketing.

“This is designed to reveal aspects of the car that might now be obvious,” he says. “It delivers insights beneath the skin.”

Facebook Friends VR to Tune of $2.3 Billion

Virtual reality offers a closed, totally immersive experience that is delivered via a headset or similar device.  It jumped into the spotlight in 2014 when Facebook paid $2.3 billion for Oculus VR, a maker of devices to deliver virtual-reality experiences.

Several automakers are experimenting with – or have announced plans to experiment with – virtual showrooms. Audi has a virtual showroom in London and plans to open more in cities around the globe. Cadillac says it wants some of its smaller dealerships to use virtual showrooms rather than expensive brick-and-mortar facilities.

It is an interesting strategy that potentially can lower costs, says Ed Kim, vice president-industry analysis at market researcher AutoPacific. “But this approach does reduce the ability of the customer to kick the tires, so to speak,” he says.

That is still an important aspect of the car-buying experience. In AutoPacific’s 2015 New Vehicle Satisfaction Study, 57% of new-vehicle buyers said a test drive at a dealership was important, Kim says.

“I don’t know if the virtual-showroom approach will necessarily boost sales on its own,” he says. “But it can serve as a new method of dealer outreach to a certain kind of consumer.”

If that outreach occurs in any place besides the dealership, that could be a problem, says Charles Gallaer, an associate attorney at Bellavia Blatt & Crossett. For example, someone in a shopping mall offering virtual test drives could run afoul of a state’s franchised dealership laws.

“Are they doing something that looks like they are acting as a car dealership?” he says. “What is the secret sauce that makes it look like a car dealership?”

His company’s main customers aren’t the dealerships themselves, says Pat Hadnagy, vice president-virtual reality at Southern California-based EVOX Images.

EVOX started out as a provider of those 360-degree vehicle images you find on manufacturer and some dealership websites. Three years ago, it saw virtual reality was going to arrive in a big way and began shooting every vehicle with technology that allows the images to be used in virtual showrooms, says EVOX CEO David Falstrup.

Swiping rotates virtual vehicle for 360-degree viewing.

It now has a library of more than 800 vehicles, all of which have been available in virtual reality since January 2015, says Hadnagy. Its customers are dealership groups, automakers and dealer solution providers.

Millennials will be the largest car-buying group in the future, and virtual showrooms will be another way for them to do their research and shopping, says Hadnagy.

It is likely those Millennials will own their own set of virtual-reality headsets. Currently, they are seen as high-cost tech toys. But by 2025, the cost will have come down and the market will reach $62 billion, says investment bank Piper Jaffray in its “Next Mega Tech Theme is Virtual Reality” report.  “Virtual reality will take time, but will profoundly change our lives,” says the report.

Whatever that change, actual dealerships likely will still have a role to play in the world of virtual showrooms. Neither EVOX nor Izmo sees virtual reality replacing the test drive.

“We feel that ultimately you want to feel connected with the car (and) in advance of a test drive we feel virtual reality is the most emotionally immersive way to experience that,” says Hadnagy.

Izmo’s Soni says: “Our intention is to get customers to go do a test drive.”