Rumors over the last few weeks indicate that Apple has dramatically scaled back its secretive car project. Instead of building a full-fledged car, the iPhone maker is reportedly now focused on the autonomous driving system and other related technology. KGI Securities analyst Ming-Chi Kuo has sent out a new report to investors claiming that the Apple car platform could include augmented reality.

Apple Car Concept
Image Credit: Automobile Italia/Flickr

It will give Apple car a 3-5 years lead over rivals

Kuo, one of the most respected Apple analysts out there, said augmented reality fits in well with Apple’s philosophy of offering innovative user experiences through unique interfaces. The first Apple product with AR is still a year or two away. The AR interfaces could dramatically change the way users interact with the Apple TV and Apple Watch. Kuo also believes that Apple could integrate the AR tech in its automotive technology.

While other tech giants like Google, Samsung, and Facebook have been busy launching new virtual reality headsets, Apple is betting big on augmented reality. When its AR technology matures, it will give Apple a 3-5 years lead over its rivals, said KGI Securities. Apple has been working on the so-called Apple car for almost two years, but the project has been re-calibrated after key departures.

Tim Cook is betting big on Augmented Reality

Virtual reality puts you in a completely 3D environment. On the other hand, augmented reality adds a virtual layer onto the physical world, allowing the real and physical objects to interact in real time. Niantic’s hit game Pokemon Go is a fine example of augmented reality technology. Last week, a report claimed that Apple was testing an augmented reality heads-up display with Siri integration for its self-driving car software and supporting hardware.

Apple has hired more than a hundred AR experts. Tim Cook hasn’t shied away from talking about AR openly. In July, he said during the company’s earnings call that Apple was “high on AR for the long run.” During an interview with Good Morning America in September, Cook said he believes augmented reality would eventually become a bigger business opportunity than virtual reality. It helps explain why the iPhone maker hasn’t launched a VR headset.

Apple has acquired several AR startups

Besides developing the AR tech in-house, Apple has acquired several startups in the space such as the motion capture specialist Faceshift, computer vision startup Perceptio, and German AR firm Metaio. It’s still unclear how the Cupertino company would integrate augmented reality in its car technology. AR could offer cars more information while on the roads.

Developing the autonomous driving system and related technology is a calculated move. It will leave the options open whether Apple wants to build cars itself or acquire an established automaker.