Mercedes-Benz: Driving the Future of Luxury and Innovation

Our founding fathers were two pioneers. They invented the first car. They were visionary people that said, “Let's not make a horse run faster. Let's just take the horse out of the equation.” You have this physical vessel, and you can decide, wherever you live, at any point in time, to go wherever you want. That is freedom.

JAVIER (V.O.)

From its legendary racing cars to our growing lineup of premium EVs, Mercedes-Benz has led performance, luxury, and innovation in the automotive world for more than a century. Today, under CEO Ola Källenius, the company is navigating its most profound transformation yet, this one driven by electrification software and the threat of new players. The sector could not be in a more interesting point.

JAVIER (V.O.)

As an analyst leading [the] Morgan Stanley European auto team, I wanted to learn about how Källenius is leading through this period of disruption. So I travelled to the Mercedes-Benz Museum. There I got an early look at the new electric GLC and sat down with Ola to talk about this pivotal transition.

JAVIER

Thank you very much, Ola. It’s a great pleasure to be here with you today.

OLA

Welcome, Javier, to the Mercedes-Benz Museum.

JAVIER

So exciting to be here with you today in front of the most expensive car in history.

OLA

Indeed. We're sitting in front of the so-called Uhlenhaut Coupé, a racing car from the 1950s. We had an auction a couple of years ago of the spare car to this. That car was auctioned for 135 million Euros: the most expensive car ever sold. And we took this money and put it in a fund that is now funding projects for young people doing engineering and sustainability projects around the world.

OLA

You could say this is the Mona Lisa of cars.

JAVIER

What makes a Mercedes a Mercedes?

OLA

More than 130 years of engineering excellence. That's Mercedes: class leading safety, quality, longevity, technology innovation, the way the car rides and drives. But there's also, like a little bit of an irrational side to it: a beauty, an emotional side to it, the timeless elegance of a Mercedes, the attention to details, some things that are kind of zeitgeist luxury. So you get this perfect blend between intelligence and emotion, heart and mind. That is what Mercedes-Benz is all about.

JAVIER

Why is formula one so relevant for Mercedes.

OLA

You can say that the Mercedes brand is born on the racetrack. It's part of our DNA. You have to go back to 1901, when a German industrialist by the name of Jellinek went to Gottlieb Daimler and his chief engineer, Wilhelm Maybach, and said, “I want you to build me a race car. I'm going to go race in Nice, and I want the best race car. I have one condition: I want the car to be named after my daughter.” And her name was Mercedes. So he got these cars. He won the race. And the rest is history. And we have more than 100 years of the legendary Silver Arrows racing in different series. We were there from day one when Formula One was founded in 1950. Motorsports and racing—Formula One—is inseparable from the Mercedes brand. It's the pinnacle of technology, in terms of the ultimate racing machine.

JAVIER

How has luxury evolved, and how will luxury evolve for autos

OLA

One thing is obvious. When you look at these objects here, they're like pieces of art. So the aesthetics of a car still matter, and you have to keep on reinventing yourself and almost predict: What's the next generation modern luxury, what is it going to look like? What will people like? It's—I said, “timeless elegance”—but it's also a little bit sometimes of an understated luxury that you say, “This object is an object in this time.”

But as you can see with these cars around here, they stay beautiful for decades. Even if it was different technology back then and the shapes were different, form follows functions. New technology drives new shapes. You still have to have this sense of creating something that is also timeless. Materials: they matter also. In a digital world, we try to create not just the digital functions that you're used to from your smartphone. We want to make it aesthetically pleasing. But look at your living room: if you have the latest high-tech TV in your living room, maybe you still want to have some very nice designer furniture to go with that. And that's like the “Welcome Home” feeling in a Mercedes. It's the blend of this digital and analog world. Both things count.

It's like a high-end Swiss watch with Apple functionality in it. So it's a best of both worlds blend because the customers, and especially younger customers, and especially younger customers in Asia, they want the latest gadget on the digital side as well.

JAVIER

Today is a very important day. You have revealed the new electric GLC. What are the expectations, and why is it so relevant for Mercedes?

OLA

The GLC segment with a compact SUV is, for our business, actually our biggest segment. So there's no other model that we sell more every year than the GLC. So in that segment, if you introduce a new car, obviously you want to get it right, yeah? This new GLC actually ushers in the next generation of design language for Mercedes-Benz.

So you will see an iconic Mercedes look that you immediately recognize as a Mercedes. You cannot mistake it for anything else, but [it’s] interpreted in a future high-tech way. But it's also a carrier of our next-generation electric drivetrain, and also [our] next-generation compute, automated driving, infotainment, smart cockpit AI, [and] agentic AI. So this is a technology carrier that takes everything to the next level: better range, better efficiency, phenomenal short charging times, [and] compute parts— it’s literally a supercomputer on wheels. All of those things that you can say, “This is the frontier of what high tech can give you today,” but with an iconic look.

JAVIER

And in this world that is transitioning, and electric vehicles and software [are] changing cars, how do you make sure that you maintain—that you preserve the soul of—a Mercedes?

OLA

We are in a once-in-a-hundred-year transformation right now. Or you could say disruption. And yes, so often it's technology that is driving this transformation: going towards zero emission, the electric car, but also artificial intelligence [and] compute power. The amount of compute power you can now put into a car, compared to ten years ago, is unbelievable.

So you can do so much more. Since we're an innovation, technology-driven company, you have to be on the forefront of that. But it's still a physical object. We're still physical beings, and we need to go from A to B; in the case of Mercedes, from A to B in style. So all those other values— that’s safety or how do you get a “Welcome Home” feeling inside the car [where] aesthetically everything is right, the seats are ergonomically perfect? All of those things they matter too, so they also move on. So yes, it's a lot about these new technologies, and we're taking full opportunity of what they can do for our customers, but at the same time, we keep on refining the original recipe as well.

JAVIER

And this transition from hardware into software has to have a lot of cultural implications. And what changes do you have to make to make it happen?

OLA

There's no doubt that that is one of the biggest changes as part of this transformation. It's not like we haven't worked with software before. The first sophisticated pieces of software we probably already had, kind of, at the end of the 80s or so or into the 90s, but it was a different work share. Most of the software was developed by suppliers, and we were the ultimate integrate.

That has fundamentally changed. Now you're the architect of a software stack and a corresponding chipset, an electric electronic architecture underneath that. But it's not black-and-white, from having done not so much of the actual work before to doing everything now. That doesn't make sense. You have to find a middle way where you still work with the best tech partners in the world.

So you understand everything. You are the architect. You control the brain and the central nervous system of your car. But you are in kind of an open-source mentality, open to integrate any use case from a tech company that the customer wants to see in the car. And that's what's happening now. And with this new GLC that we talked about, it's actually the first full-scale launch of what we call MBOS, Mercedes-Benz operating system.

We have had precursors of it in different domains of the car. Now we have the full thing, and every single bit of that car is reachable over the air, which means your car doesn't age digitally. So you buy a car from us, and it actually gets better over time because we can download more functionality to you during ownership.

JAVIER

Let's talk a bit about autonomous driving. It’s obviously going to be a revolution in the way we drive, in the driving experience. How fast do you think that this revolution is going to happen

OLA

It's changing now, literally as we sit here. The very first autonomous driving project at Mercedes was back in the 1980s. Back then, we didn't have the compute power. We didn't have the sensing; we didn't have the sophistication of artificial intelligence [and] machine learning that we have today. But the vision was there. And already today, we have partial autonomous driving.

We have extremely sophisticated so-called “Level Two Systems,” where you as the driver, you're in charge, but it feels like the car is driving you, but you have to pay attention. 

And we were the first manufacturer a couple of years ago that launched the so-called “Level Three System” for the highway, where under certain driving conditions, it’s actually the computer that drives. So you can do other things. You can maybe check your messages. Maybe you want to watch a movie. So that's happening already today. You can buy a Mercedes-Benz, here in Germany or in some states in the United States, where you have this feature.

And that's just to start. With the next generation of computing power, even more sophisticated AI, Gen AI, being entered into the autonomous driving field, creating so-called end-to-end foundation models, this space is just absolutely exploding. But it will still take some years before billions of cars that exist in the world will actually drive autonomous.

JAVIER

And this is obviously today a competitive advantage. But don't you think that it's a question of time, that it will become a commodity and then not be an advantage anymore?

OLA

If I look back at many of the innovations that we have brought to market, for decades on end, it starts with us. And then eventually it finds its way into every car. Maybe that's the role of a of a manufacturer like Mercedes-Benz. You're at the top end of the market. You're a company that is technology [and] innovation oriented.

We put the money into R&D to do things that maybe other people don't do. Some of the most famous safety innovations over the decades, I don't know, like the airbag ABS or ESP or PRE-SAFE, all of these different things, they came from Mercedes Benz. And then eventually they find themselves into all cars, which is a good thing because it makes traffic safer.

And when it has found its way into every car, we're already on the next.

JAVIER

Well, I was such a big pleasure to be with you and in this impressive place today. Thank you very much.

OLA

Thank you, Javier.