Better cameras aren't enough - you also need much brighter lighting. So bright customers would complain and get headaches.
Or alternatively, have the camera close to the customer's face. Again, nobody wants that... though we do put up with it for ATMs / etc.
Android Auto/Car Play don't require giving the car access to anything. It should just be a simple video signal output, touch screen coordinates, and audio output/input line.
And I'm pretty sure that is how it works, unless cars are applying screen reader/etc technology (TVs do that, so I wouldn't put it past car manufacturers...).
I'm pretty sure this article is talking about bluetooth, not Android Auto / Car Play. The bluetooth car protocol sends a copy of your full address database to the car because it's a low bandwidth protocol that minimises sending data back and forth while the user is interacting with the hardware. I would never pair my phone to a modern car with bluetooth.