According to sources, Mercedes will use the Momenta software in four models to accelerate its comeback in China

SHANGHAI/BERLIN (Reuters) – Mercedes-Benz is betting on China’s Momenta to regain market share in the world’s largest auto market, planning new investments and at least four future models that will use the startup’s autonomous driving software, according to three sources with expertise said.

The plans, which have not been previously reported, will make autonomous vehicle developer Momenta the first Chinese supplier chosen by Mercedes as the main supplier of a key technology and selling point for its products, as fierce competition and technological innovation in China pushes the West Automakers need to rethink their supply chain strategies.

The German premium automaker has invested in Momenta since 2017, but the two companies have not yet publicly announced any products developed.

In the years since, the Chinese company has become one of China’s leading providers of advanced driving assistance systems (ADAS), which are similar to Tesla’s fully autonomous driving and can navigate city traffic under the supervision of a human driver.

According to the sources, Mercedes intends to make a new investment of $75 million in Momenta and may invest more as a lead investor in Momenta’s IPO planned for the first quarter of 2025.

The company has selected Momenta as the ADAS supplier for four models to be launched in China from 2025 to 2027 and is discussing internally whether to use Momenta’s software in additional Chinese models after 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 U.S. artificial intelligence chipmaker Nvidia as part of a partnership announced in 2020, in which the company said it would develop Mercedes-Benz vehicles with upgradeable automated driving features. However, the companies have not yet introduced any products.

BEHIND IN CHINA

Mercedes is catching up in both electric vehicles and intelligent driving software in China, led by Tesla, Nio and Xiaomi.

Just 3% of the 443,764 Mercedes cars sold in China this year were electric cars, according to the China Association of Automobile Manufacturers, less than a tenth of Nio’s sales.

Automakers in China are in a race to achieve autonomous driving, with BYD hiring thousands of engineers to boost internal development of such software. Nio, Xpeng and Xiaomi are developing their own ADAS chips that could achieve better smart driving performance with their electric vehicles.

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