Augmented reality is coming to cars, with navigation in mind rather than art or entertainment. Mercedes-Benz is developing augmented reality for its in-car navigation system. Similar to what Audi A3 owners can do with an iPhone app (though just in Germany for now), these overlays will run on the in-car touchscreen as you drive around town.

The German luxury automaker will reveal the new technology at the InsideAR conference in Munich on October 10, according to a report posted on The Augmented Blog. The blog is managed by Metaio, the company that also spearheads the conference.

As you drive, the dashboard touchscreen will show a live video of your surroundings. Pop-up graphics like directional arrows, street names, and points of interest will appear on top of the video in real-time to help with navigation. It's partly an effort to help you find your destination, and partly a way to make driving more fun and productive.

A previous Mercedes-Benz research project, called the Dynamic & Intuitive Control Experience (or DICE), hinted at a video-centric experience inside the car. It relied on gestures and a head-up display (HUD) that appears on the windshield of the car.

The new research project, known as the In-Vehicle Infotainment System, does not use a HUD. According to the report, a high level of augmented reality would cause too much driver distraction on the windshield. Instead, it relies on the Mercedes-Benz Splitview technology, where the in-dash display shows one view to the driver and another view to the passenger. The driver might see the navigation route, and the passenger would see points of interest, such as a panoramic view or a live geocache pop-up located along the current route, ready for plundering.

In a conversation with us, Mark Boyadjis of IHS said the great challenge with augmented reality is the need for a massive storehouse of pop-up information--more than we have today.

"Augmented video systems could come [before windshield HUD] and with wider adoption, but this will take a very reliable forward-facing camera and a very hefty map database – one with 3D point cloud mapping that can show the real environment, if the camera system cannot perform, due to rain, snow, and other factors," he says.

Boyadjis projects that the first cars with AR systems will appear within a year and have a healthy adoption rate: "Our expectations are that the first real AR system will launch in 2015 on a production vehicle, and then by 2023 surpass 2.1 million annual sales worldwide."

Mercedes-Benz didn't say when anyone would get a chance to try this new augmented-reality system. However, there's a clear trend in wanting the driving experience to be more productive using a 4G data connection. The question always remains whether the technology will help--or just distract us further from the road.