Mercedes-Benz cars to have 'supercomputers', unveils Google partnership

Automakers new and old are racing to match software-powered features pioneered by Tesla, which allow for vehicle performance, battery range and self-driving capabilities to be updated from a distance.

The German carmaker agreed to share revenue with semiconductor maker Nvidia Corp (NVDA.O), its partner on automated driving software since 2020, to bring down the upfront cost of buying 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 sunk costs would be low even if drivers did not turn on every feature allowed by the chip.

But only customers paying for an extra 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 owns a small stake, said on Wednesday it struck a multi-billion dollar deal with the carmaker to integrate its sensors across a broad range of its vehicles by the middle of the decade, sending Luminar shares up over 25%.