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At a recent tour of the Mercedes-Benz research and development lab in Sunnyvale, Calif., a space meant to showcase a command of innovation for the future of transit, the luxury carmaker did something counterintuitive: It led with the past.

The company began with a brief history of its German founders. They were cast as disrupters before their time, birthing the automobile industry nearly a century ago “Silicon Valley-style.” That enterprising streak, the company continued, made it the first big carmaker to set up a research headquarters here in 1995.

“Imagine, just 20 years ago,” said Arwed Niestroj, the lab’s CEO. “Google didn’t even exist.”

Therein lies the rub. Mercedes, like its fellow automakers, risks being bum-rushed by incoming tech giants Google, Apple and Uber. Despite rising sales, car companies are quickly coming to terms with a future where most cars drive themselves, fewer people buy them and — what terrifies the car industry the most — the vehicles turn into commodities. For tech, transit’s future, particularly in cities, is in services; tap a phone and your robot car arrives. It may not matter who makes it.

Mercedes’ strategy to stave this off is to come at it from all angles. It still has its high-end product. The carmaker, which is owned by Daimler AG, is deploying autonomous features in its luxury cars and working on fully self-driving vehicles, bolstered by the recent acquisition of the Here mapping tech. And it’s gunning for services: Daimler, the parent company, runs a car-sharing service, car2go, which is active in 31 cities worldwide and is similar to Zipcar. It is also toying with a ride-booking service for kids akin to Uber.

“We believe in the 21st century, cars have to be very different. We have to think about them in new terms,” said Niestroj. “It will become a mobile living space.”

As such, the car manufacturer is moving into different fields, imagining how hardware, software and media work inside the driverless cars of the future. It breeds strange hypotheticals. Here’s one rendering from the Sunnyvale lab.



Mercedes is also working on predictive artificial intelligence, squarely Google’s domain. In the near future, Niestroj explained, you may slide into your car in the morning and the car will recognize you’re driving to work. It will give you a map and offer to put you on the phone with “your assistant.” (You drive a Mercedes, after all.)

The carmaker has its work cut out for it. Its North American R&D lab has around 240 employees and a “handful” are working on machine-learning tech, said Niestroj. Google, Uber and probably Apple have many more researchers, and likely resources, devoted to this. Daimler’s overall market cap is just north of $85 billion — a bit larger than Google’s cash pile and less than half of Apple’s.

Mercedes, however, is making some headway in automation. I went for a spin in its self-driving S Class around suburban California. It’s impressive — the luxury car, packed with radar and sensors, handled most stops and gos smoothly. But it’s a little rougher than Google’s Lexus cars, which have been on the road for six years. At one point, the Mercedes sedan came to a sharp halt mid-intersection, confusing the glare from the street markers with a stoplight.

As of September, the company has registered five autonomous vehicles with the California DMV. Unlike Google and Tesla, these autonomous Mercedes cars do not share visual data across the fleet. The tech isn’t there yet, said Axel Gern, who leads Mercedes’ self-driving initiative in North America.

But Mercedes did get a boost from the Here maps, which Daimler bought with two other German carmakers from Nokia this summer. With the maps, Mercedes’ self-driving cars have a clearer indication of the physical realities on the road, said Gern.

In the long run, the maps also give the carmaker a hedge against Google, whose auto ambitions are growing.

Mercedes is departing from Google in another way, one that could have more immediate implications.

Soon, all the carmakers working on autonomy will have to confront the issue of manual takeover. As self-driving features get more advanced, drivers will do less and less behind the wheel. But they will still need to take over, and assume liability. (Tesla is dealing with this issue now.) Google has said adamantly that this moment, when a driver must take over semi-autonomous cars, is among the most dangerous and that full autonomy is the only safe alternative.

Mercedes differs. “I do not completely agree with what Google is saying there,” said Gern, when asked about this debate. “We have a lot of experience there. It has to do with human-computer interaction.”

“I think there is a solution to that problem,” he added.
 
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