Mercedes to use Momenta software in four new models to accelerate China comeback

Mercedes-Benz is betting on China's Momenta to help it win back market share in the world's biggest car market, with plans for fresh investment and at least four future models to use the autonomous driving start-up's software, three sources with knowledge of the matter said.

The plans, which have not been previously reported, will make autonomous-driving developer Momenta the first Chinese supplier picked by Mercedes to be a primary provider of a key technology and selling point for its products, as intense competition and technological innovation in China force Western carmakers to rethink their supply-chain strategies.

The German premium carmaker has since 2017 had an investment in Momenta but the two companies have yet to publicly announce jointly developed products.

In the years since, the Chinese firm has emerged as one of China's leading suppliers of advanced driving assisted system (ADAS) features similar to Tesla's full self driving that can navigate urban traffic with human drivers' supervision.

Mercedes intends to make a fresh $75m (R1.36bn) investment in Momenta and may invest more as a cornerstone investor in Momenta's initial public offering scheduled in the first quarter of 2025, the sources said.

It has chosen Momenta as its ADAS supplier in four models to be launched in China from 2025 to 2027 and is discussing internally whether to use Momenta software in more Chinese models beyond 2027, one of the people said.

It is also working with Momenta on preliminary plans to use the Chinese supplier's technology in Mercedes models outside China, two of the people said.

Mercedes and Momenta declined to comment.

Mercedes has also been exploring ADAS options with US artificial-intelligence chipmaker Nvidia as part of a partnership announced in 2020, when they said they would develop Mercedes-Benz vehicles with upgradeable automated-driving functions. However, the firms have yet to unveil any products.

Mercedes is playing catch-up in China on electric vehicles and smart-driving software, which is led by Tesla, Nio and Xiaomi.

Only 3% of Mercedes' 443,764 cars sold in China this year were EVs, according to the China Association of Automobile Manufacturers, fewer than one-tenth of Nio's sales. Carmakers in China are locked in an autonomous-driving race, with BYD hiring thousands of engineers to ramp up its in-house development of such software.

Nio, Xpeng and Xiaomi are developing their own ADAS chips that could achieve better smart-driving performance with their EVs. The trend has also helped Chinese ADAS suppliers Momenta, Huawei and DeepRoute.ai quickly amass carmaker clients and embed several vehicle models within their systems.

Momenta's clients include BYD, SAIC and Audi in China. Momenta's largest carmaker investor is China's SAIC while other backers include General Motors and Toyota.