Mercedes-Benz AI and Autonomous Driving Shift Signals Bigger Transformation

AI and Autonomous Driving Could Outpace Electrification

Mercedes-Benz Group AG chief executive Ola Källenius said the automotive industry's move into artificial intelligence and autonomous driving could prove more transformative than its transition to electric powertrains. Speaking by video at the 66th annual convention of the Society of Indian Automobile Manufacturers, Källenius described electrification as a "once-in-100-years" change, but said the digital transformation could be even larger. "I would argue, technologically, what's happening on the digital side is even bigger," he told delegates. His assessment places software, AI and automated driving at the center of the industry's next major technology cycle, with automakers preparing for rapid changes in vehicle development and operation.

Automated Driving Expected to Scale Rapidly

Källenius expects automated driving to expand significantly during the next three to five years, following roughly a decade of development work across the industry. He described the coming period as "a massive, massive scaling and adoption of different types of automated driving," signaling that technologies previously treated as long-term capabilities could move toward broader deployment. For automakers, that shift could change how vehicles are engineered, tested and continuously improved, while increasing the importance of software and digital systems alongside conventional mechanical development. His comments also underline the strategic importance of building the engineering capabilities required to support increasingly automated vehicles.

India's Engineering Role Expands

India, according to Källenius, is positioned at the center of this technological transition. Mercedes-Benz Group AG's engineering operation in Bangalore, which is the company's largest engineering base outside Germany, employs about 8,500 people and reaches its 30th anniversary this year. Källenius said he intends to visit the center in person this autumn to mark the milestone. He emphasized the global role of the operation, saying, "There's a piece of India in every Mercedes-Benz," and noting that the facility has "worldwide responsibility within Mercedes-Benz for many systems and components." The comments highlight India's growing role in global automotive engineering rather than only as a vehicle sales market.

Local Assembly Identified as a Potential Growth Lever

Källenius also discussed Mercedes-Benz Group AG's position in the Indian premium vehicle market. Although the company's sales volume remains relatively small compared with its global business, he said Mercedes continues to lead the premium segment in India. He identified deeper local assembly as a possible next step for growth and raised the prospect of moving toward more extensive part-by-part production in the country. "When is the time where you can really go big in India, maybe even go into part by part someday?" he asked. He also welcomed the India-EU trade pact, saying, "Europe is more open for business vis-à-vis India, and India is more open for business vis-à-vis Europe."

Engineering, Manufacturing and Trade Strategy

The discussion placed technology and industrial strategy alongside India's evolving role in the global automotive supply chain. The Bangalore engineering center's responsibilities across systems and components give a direct connection to Mercedes-Benz development programs worldwide, while greater local assembly could potentially deepen the company's manufacturing footprint. At the same time, the trade pact referenced by Källenius could support broader commercial engagement between Indian and European automotive businesses. Together, these points suggest that Mercedes-Benz sees India not only as an important premium vehicle market, but also as a location for engineering, component development and potentially expanded manufacturing activity.

AI Adoption Has Yet to Deliver Broad Profitability Gains

His remarks followed a presentation from McKinsey senior partner Nitesh Gupta, who highlighted a gap between the automotive industry's adoption of artificial intelligence and the financial results companies are achieving from it. Gupta said 88% of automotive companies use AI in some function, while only about 6% report a meaningful impact on profitability. The figures add context to Källenius's view of the digital transformation: widespread adoption does not necessarily mean that companies have already captured substantial economic value. For automakers, the next phase may therefore depend not simply on deploying AI, but on scaling applications that deliver measurable improvements in vehicle technology, engineering, operations and business performance.

Frequently Asked Questions

Why does Mercedes-Benz consider AI and autonomous driving a major automotive transformation?
Mercedes-Benz CEO Ola Källenius considers digital technologies potentially more transformative than electrification because automated driving and AI could rapidly reshape vehicle development, software, engineering and operations. He expects "a massive, massive scaling and adoption of different types of automated driving" over the next three to five years, following about a decade of development work. His comments also emphasize India's strategic role, particularly through the company's Bangalore engineering center, which supports systems and components with worldwide responsibility across Mercedes-Benz.