Software updates will make cars better over time: Mercedes-Benz

Over-the-air updates and tweaks to software will allow Mercedes-Benz to improve its vehicles after customers make a purchase – similar to how smartphones operate – according to the carmaker’s boss.

Mercedes-Benz boss Ola Kaellenius told journalists before the reveal of the seventh-generation S-Class sedan that the added computing power put into its new models, and partnerships with companies like graphics card maker Nvidia, push its cars towards being more like a tech product.

“We’re going to put so much computing power into the future Mercedes (models) that when you buy the car, that’s not the technical peak of the car, the technical peak of the car it will evolve,” he said.

“We will be able to enhance and improve the driving assistance of automated driving experience as time progresses.

“You change the logic there; you then also change the selling logic that you can upsell and continue to sell more content.

“This partnership will come with a business model change as well, which is more smartphone-like.”

In essence, these updates will function much like factory options but available after taking delivery of a car after new software has been developed.

An example of this is the new S-Class’ Level 3 autonomous driving features, which will not come online until next year despite the hardware being already fitted to cars now.

Mr Kaellenius said some of these updates will be locked behind a paywall however, opening a new revenue stream for the brand.

“The contribution margin on a car, of course, you have aftersales with replacing brakes and things like that – a traditional business model, a good business model,” he said.

“But if you can add a digital one on top, where you have low variable costs – you still have R&D costs of course – you dip into another profit pool that we haven’t had before.

“This is not new to us, we started this with MBUX in 2019, so the first baby steps have been taken.”

The current MBUX system operates its own app store, allowing users to purchase software to use in Mercedes vehicles.

Mr Kaellenius hinted that these extras might expand from MBUX to encompass vehicle features, such as a higher-output engine tune for example, in the future.

“Those are things that I can see happening in the future, not immediately planned of course,” he said. “But in the future, you can think about going in the direction of selling everything that has software components to it, also over the air.

“Some of the fantastic technology you will buy when you buy the car, but you can also choose. If you don’t want to branch out and get all the bells and whistles, you don’t have to do that, you can make up your mind later.

“It is the new status quo, and the new S-Class gives us more opportunity to sell more features.”

However, it is currently unclear exactly what features or updates Mercedes will keep behind a paywall, and whether that fee is a one-off payment or an ongoing subscription.

Likewise, this sales model might not be relevant to all markets around the world, as Australia tends to offer vehicles loaded with high levels of standard equipment, whereas parts of Europe may offer cheaper models with less gear and a long options list.