“We know how to do drivetrains … and we’ve been in chemistry research for batteries for 20 years now. Software was bigger decision, because … We need to control the brain and the central nervous system of the car, and we need to be the architect of that stack.”
But they can’t do it all alone. While the core architecture will be all Mercedes, certain functional elements still need outside partners. “We’re going to develop the next-gen auto maps with Google. It will be a joint venture between Mercedes-Benz and Google to show what mapping navigation should look like in the car of the future.”Mercedes CEO Ola Källenius on Mercedes pivot to software
It is fascinating to consider how manufacturers will diverge on this front in the coming years. Tesla has built a fast, distinctive, and totally integrated software stack that is a huge competitive advantage. In theory, other automakers can and will catch up with the basic premise, but it requires years of investments in building large software and hardware engineering and design teams, systems planning, and a certain alchemy to get it right. While Mercedes is already among the strongest automakers and luxury brands on the planet, this pivot towards software as a distinguishing piece of their brand identity is essential. Still, bold CEO proclamations are easier spoken than achieved.
At the other end of the spectrum are makers looking for more agile business models, with lower capital costs and potentially quicker time to market. Leveraging off-the-shelf architecture, ADAS, software interfaces, components, and even contract manufacturing (like Fisker), younger (or more cash-strapped) brands will focus their selling proposition less on advanced software integration and more on emotional appeals like unique styling and clever product features.
The risk of not investing in the software stack is huge, though. As EV powertrains take over from ICE engines, legacy automakers are losing what was once a massive moat to protect their market share. The capital costs, engineering, and regulatory expertise needed to bring gas engines to market kept out new challengers. But with the commodification of the powertrain and the rising tide of Chinese brands, unique, delightful, and well-itegrated software experiences will become a crucial new batllefield.