For some time now, Volkswagen/Audi have lead the industry in producing cars with excellent interiors. Both the functionality and quality have exceeded cars produced by other manufacturers. In fact, they have been the benchmark for other manufacturers when they develop new models. Other manufacturers are only now realizing that long-term satisfaction with their cars depends a lot on interior accommodations. The interior is the part of the car that the owner spends most of his time with and it is the part the owners touch, see, and smell as long as they're inside the car. The style, quality, durability, and comfort of the interior appointments determine how pleasant the occupant's stay is in the car.]
It is interesting that both styling and quality are the focus of current interior design. Detroit looks at styling as most important, but suppliers report that the Europeans are willing to spend about 20% more on content than the U.S. manufacturers are. So if the Europeans do a reasonable job on styling, then the feel of the interior of the European car is likely to be more luxurious than the corresponding U.S. car. The philosophy in Detroit is "make it look good, but don't spend too much money". A big mistake.
A case study of interior improvement is the Nissan Altima. When the current model was introduced in 2002, the interior was criticized as an obvious victim of cost cutting. Nissan was aware of this, so for the restyle of 2005, Nissan Design America revamped it to look better. I haven't seen one in person yet to verify that the feel is any better, but from pictures, it certainly does look better -- very European.
All the manufacturers use vinyl, usually some leather, plastic, and wood grain in their cars. The challenge for any manufacturer is to find ways to improve the appearance without blowing the budget. It is a very detail-oriented process. But also part of the process is exactly what that budget is in the first place. There are many stories about the former chairman of Volkswagen, Ferdinand Piech, touring design studios and discussing various trim pieces. He would argue for better quality being important than a slight increase in cost.
The biggest factor affecting both cost and appearance is the choice of which type of plastic is used. Injection molding has almost become synonymous with cheap for many in the industry. Injection molded polypropylene is the hard, shiny plastic present in the interiors of many entry-level cars, and reminds drivers of what they are driving. Hard, shiny plastic is the appearance that manufacturers (and customers) are moving away from. The move is to softer, low-gloss finish plastic. The industry notes that Volkswagen and BMW are the leaders in this movement. The citation is that you will see a soft panel in a Volkswagen Golf, but a hard panel in a Honda Civic or Ford Focus.
The suppliers now have the problem that injection-molded material is so low in cost that it is very attractive to manufacturers. That means that the research today is how to make it more acceptable to customers. The results of the research show that new processes are possible, but will be a bit more expensive. The goal for the manufacturer is to separate the "cheap" from the "inexpensive" design. Can they do it? Or are they willing to do it? One supplier has been quoted as saying that the money spent is more significant on the last 10% of the details, but for some manufacturers that last 10% is "get it out of the door and on the road". Unfortunately for the customer, that last 10% is what makes or breaks an interior.
An example of good detail design is the Lexus RX330. If you look at the door panel, there is hard plastic on the lower part where you might kick it, but is mostly hidden when the door is closed. The upper part of the panel is beautiful. Money was spent where you see it, not where you don't.
Paint, or the type thereof, is a tool the designer uses on interior parts. The Acura MDX uses some hard panels with metallic-finish paint to make the interior look more expensive without making it really costly. The Ford F-150 uses different finishes and paints to make the interior look more upscale than the previous model.
Fit and finish are an important part of the look of the interior. One big push for designers and suppliers is to reduce the number of parts so that the gaps that might look big to the customer don't exist at all. The new Jeep Cherokee went from 50 part intersections to 26, and those with the smallest possible gaps. I haven't seen this one yet either to verify if it was successful.
Another factor is what finish is used on the plastic. Does the manufacturer try to make it look like leather -- often unsuccessfully? The current approach is to use a finish that compliments the leather because trying to make the grain match between plastic and leather can be expensive. If it doesn't match, it can look really awful. The example cited here is the Toyota Prius. Nothing in the interior tries to look organic. Was it because Toyota wanted it to look futuristic, or because they wanted to satisfy the vegans?
Age of the customer can be a factor in design. Young people are more likely to accept non-standard choices of materials, but the older customer wants a traditional interior in their cars. Does a customer really want the instrument panel of their car to look like a chronograph?
One thing I didn't think of was a "rap test". What does a part sound like when you pound on it? Does it have a hollow, cheap sound? Or does it sound "plastic"? The manufacturers and suppliers are looking at details like this.
Now that we've looked at what you see and feel when you sit in the driver's seat, what about the seat itself? That's what you touch and feel first. More research is being done here to make seats look modern and feel comfortable, but become lighter and less expensive to make given the requirement for multiple electric adjustments.
Not only are manufacturers trying to get cost out of their cars, but they're trying to reduce weight as well. Less weight means more fuel economy. But heavy feeling materials tend to feel better. So manufacturers want to make them lighter, but not feel that way.
Clearly today manufacturers are spending big money on interior design, much more than in the past. With the competition from Volkswagen and BMW, they do need to improve. Running the company with cost accountants doesn't make a good environment to produce a fine interior.

Post Script:
Four weeks ago I discussed the increasing complexity of vehicle electrical systems with computer-controlled everything. I thought you might like to see photographic evidence of this. The top picture is the wiring and electrical equipment for a 1950 Mercedes. The bottom picture is the same for a 1995 Mercedes, the first with a CAN (car area network) which drastically reduced the wiring.