Varjo—founded by Nokia Oyj and Microsoft Corp. alumni—has been developing an augmented-reality headset with a significantly higher image resolution than those produced by its rivals, costing $5,995 plus camera add-ons.

Backed by Skype founder Niklas Zennstrom’s Atomico and EQT Ventures, the company developed the capability to merge high-resolution video of the real world with digitally rendered objects.

“We can simulate a pedestrian or an animal walking out in front of the car, and you can use the sensors in the headset to track the eye movements of the person wearing the device," Zaki Fasihuddin, head of Volvo Cars Tech Fund said in a phone interview. “This type of technology can help us learn a lot more about how to make our products safer and more user-friendly."

Volvo has built a reputation for safety over decades, being among the first carmakers to introduce features such as three-point seat belts and side-impact protection. Its has been using the headsets to test-drive cars, adding elements such as road hazards and trialing interior design aspects.

While many of the initial promises of VR headsets for consumers have been slow to materialize, Varjo is instead targeting the professional market, with companies like Siemens AG and the US Air Force trialing the gear to develop use cases.

Volvo declined to comment on the investment size. Varjo has raised just under $50 million so far to develop the headsets, and has also worked with car companies including Audi and BMW.