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Mercedes-Benz AG is focused on increasing the share of its earnings from in-car software technology with an aim to rake in around $10.6 billion of extra revenue by the end of this decade. In 2022, Mercedes earned around $1.06 billion and so, there is quite a way still left. A new operating system will be made available for Mercedes vehicles next year but the larger objective is to have a solid grip on in-car technology instead of having to sacrifice earnings to tech companies. Does that mean not taking their help? Not quite.
Mercedes recently announced it will take assistance from Google for several feature highlights on the new operating system for its vehicle models. The major highlight is a new navigation system which entails a licensing deal. Owners of Mercedes vehicles will also be able to tap into the YouTube application and hands-free driving where legally permissible to do so.
The German auto giant has already been working with tech giants like Nvidia for software and chips, and Luminar for advanced driver-assist systems. Company executives confirm that Mercedes will also continue to be in talks with companies like Amazon and Apple for software and products that are being developed.
At a time when transition to electric mobility is throwing up new challenges and rivals like Tesla are offering discounts on the final prices to lure more prospective buyers, Mercedes has had to follow suit. But while the discounts - as announced by both Tesla and Mercedes in China recently - may be rather forced, the potential for earnings from software-based feature highlights is enormous. The luxury car maker is looking at reserving around 25 per cent of its research and development budget for software alone by 2025. UBS Group AG estimated in 2022 that software-enabled auto revenue may reach $700 billion by 2030 and if this is true, Mercedes clearly wants to be in a position of strength.
(With inputs from Bloomberg)