Mercedes Targets Silicon Valley Rivals With Robo-Taxis by 2023

  • Daimler, Bosch plot autonomous cars for California, Germany
  • Self-driving vehicles set to grab market share: study

Race To Build Self-Driving Cars Accelerates

Daimler AG and the world’s biggest auto-parts maker plan to offer robo-taxis in the U.S. and Germany within six years, as competition to become the first provider of autonomous shared cars intensifies.

Daimler’s Mercedes-Benz division and automotive technology giant Robert Bosch GmbH have teamed up to run the vehicles in at least four locations, including Silicon Valley and their hometown of Stuttgart, according to a statement on Tuesday. Competing with newer entrants such as Uber Technologies Inc. and traditional rival BMW AG, the project will allow customers to order automated cars via smartphone.

Source: Mercedes-Benz - Daimler AG

“The idea behind it is that the vehicle should come to the driver rather than the other way round,” Daimler, parent of the world’s biggest luxury-car maker and Bosch said in the statement. The venture will have a workforce of a few hundred people.

Carmakers and new competitors like ride-hailing startup Uber are pouring billions into making vehicles smart enough to navigate streets on their own. While some traditional manufacturers such as Fiat Chrysler Automobiles NV are tying up with technology providers to save costs, Daimler is developing models for a new era of self-driving vehicles largely on its own.

Building a fleet of robo-taxis will allow the German company, which is also the world’s largest maker of commercial vehicles and the owner of the Smart city-car brand, to monetize the technology once it hits the mainstream and avoid becoming a lower-margin hardware supplier to Silicon Valley newcomers. It also allows Daimler to retain control of the relationship with drivers and the valuable data they generate -- even if they no longer own the cars they ride.

Beating Rivals

The partnership between two German automotive heavyweights is part of a broader shift as the industry braces for disruption. Daimler must adjust to “fundamental changes” as autos become increasingly capable of driving themselves and run on electric motors, Chairman Manfred Bischoff said at the annual shareholders meeting last week.

Investing in the future has been costly for Daimler, which has been experimenting with autonomous features for years. The company warned its profit will rise only slightly in 2017, as research and development costs continue to climb after jumping 15 percent last year to 7.6 billion euros.

Daimler has already branched into new services in response to shifts in how people use vehicles. In 2015, BMW, Daimler and Volkswagen AG’s Audi division joined up to buy Nokia Oyj’s HERE real-time maps unit for 2.8 billion euros. The Daimler-Bosch venture will use HERE’s technology. The reliability of self-driving vehicles will be a critical focus of the new project after Uber suspended an automated-car trial because of a crash in Arizona last month.

The Mercedes parent also owns the Car2Go auto-sharing business, with 2.2 million global members, and cab-hailing app Mytaxi, which merged with its U.K. equivalent Hailo last year. The German manufacturer bought U.S. ride-booking service RideScout LLC in 2014 and runs Moovel, which combines taxi, car and bicycle sharing services with public transport.

Even if shifting into services and self-driving vehicles risks sapping demand for private cars, there may be no alternative for manufacturers. Autonomous vehicles will probably make up 25 percent of new car sales by 2035, according to a Boston Consulting Group study.

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