Mercedes-Benz (MBGn.DE) said on Wednesday it has partnered with Google (GOOGL.O) on navigation and will provide “super computer-like performance” in each car with automated driving sensors as it aims to compete with Tesla (TSLA.O) and Chinese newcomers.
Automakers old and new are rushing to match software-powered features pioneered by Tesla, which allow for battery range, vehicle performance, and self-driving capabilities to be updated from a distance.
The German automaker agreed to split revenue with semiconductor maker Nvidia Corp (NVDA.O), its partner on automated driving software since 2020, to cut down the upfront cost of purchasing expensive high-powered semiconductors, Chief Executive Ola Kaellenius said on Wednesday.
“You only pay for a heavily subsidized chip, and then figure out how to maximize joint revenue,” he said, reasoning that the reduced costs would be low even if drivers did not switch on every feature provided by the chip.
But only buyers paying for an additional option package would have cars equipped with Lidar sensor technology and other hardware for automated “Level 3” driving, which have a higher variable cost, Kaellenius said.
Self-driving sensor maker Luminar Technologies Inc (LAZR.O), in which Mercedes holds a small stake, said on Wednesday it clinched a multi-billion dollar deal with the automaker to integrate its sensors across a broad variety of its vehicles by the middle of the decade, pushing Luminar shares up more than 25%.
Mercedes’ announcements at a software update day in Sunnyvale, California, explained the strategy behind a process in progress for years at the carmaker to shift from a patchwork approach integrating software from a range of suppliers to controlling the core of its software and acquiring partners.
It earned over one billion euros ($1.06 billion) from software-enabled revenues last year and expects that figure to grow to a high single-digit billion euro figure by 2030 after it unveils its new MB.OS operating system from mid-decade.
This is a more cautious estimate as a proportion of total revenue than others like General Motors (GM.N) and Stellantis (STLAM.MI) have put forward.
“We take a prudent approach because no one knows how big that potential pot of gold is at this stage,” Kaellenius said.
Google Partnership With Mercedes
Mercedes said the partnership with Google would enable it to provide traffic information and automatic rerouting in its cars.
Drivers will also be able to watch YouTube on the cars’ entertainment system when the vehicle is parked or in Level 3 autonomous driving mode, which enables a driver to take their eyes off the wheel on specific roads provided they can resume control if necessary.
Other automakers like General Motors, Nissan (7201.T), Renault (RENA.PA), and Ford (F.N) have added an entire package of Google services into their vehicles, offering features like Google Assistant, Google Maps, and other applications.
All vehicles on Mercedes’ upcoming modular architecture platform will also be equipped with so-called hyper screens extending across the cockpit of the vehicle, the company said on Wednesday.
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