Chapter 1: The Race for Autonomous Driving

When discussing self-driving vehicles, the first name that may come to mind is Tesla, thanks to Elon Musk's persistent assurances about achieving full autonomy. Alternatively, enthusiasts might think of Waymo or GM's Cruise, which are making significant advancements in robotaxi technology. Surprisingly, however, it is Mercedes—known for their luxurious V8 sedans—that has emerged as the leader in this sector by securing the first Level 3 autonomous driving approval for the U.S. market.

Before we explore the implications of this significant milestone achieved by Mercedes, let's clarify the various levels of driving automation.

At Level 0, drivers are responsible for all operations. Most contemporary vehicles operate at Level 1, which includes features like cruise control. Level 2 introduces some autonomy, allowing cars to steer themselves, but drivers must remain alert and ready to intervene. This level is classified as an advanced driver assistance system (ADAS), not true autonomy. Level 3, or conditional automation, allows drivers to disengage from active control in specific scenarios, such as watching a movie or eating, but they must be ready to take control if prompted. Levels 4, 5, and 6 reduce driver involvement even further, with Level 6 eliminating the need for a steering wheel entirely.

Tesla enthusiasts may note that Tesla's Full Self-Driving (FSD) is classified as a Level 2 system, not true autonomy. This misrepresentation has led to a Department of Justice investigation due to accidents linked to misleading claims about its capabilities.

In light of this, Musk's repeated promises of fully autonomous Teslas seem increasingly dubious. The levels of automation serve as a legal benchmark, requiring manufacturers to gain government approval before introducing advanced technologies.

Musk's assertions—like predicting full autonomy by 2018 or claiming over a million robotaxis would be operational by 2019—appear exaggerated, given Tesla's challenges progressing from Level 2 to Level 3.

In an unexpected twist, Mercedes has taken the lead. They recently announced that the Nevada DMV has approved their Level 3 application, with certification anticipated shortly. They expect similar approval in California, making them the first company to offer Level 3 autonomous driving in the U.S.

It's worth noting that Audi's A8L was the first to achieve Level 3 approval, but it has not received the same certification in the U.S. market. This development positions Tesla as lagging behind in the consumer autonomous driving race.

Tesla's inflated market value of approximately $386.50 billion contrasts sharply with Mercedes' revenue of over $40 billion in the same quarter. Despite its high earnings-to-revenue ratio, Tesla's overvaluation—estimated at 1,300% above its revenue—raises questions about its financial sustainability, especially as other manufacturers catch up.

While Tesla's unique EV technology has contributed to its valuation, the emergence of competitors like Mercedes challenges the narrative that Tesla holds a significant advantage in self-driving technology.

So why has Tesla struggled to achieve full autonomy? The company's reliance on a visual-only sensor system limits its ability to interpret the environment accurately. In contrast, Mercedes employs lidar, radar, and ultrasound sensors, providing richer data to enhance their self-driving AI's performance.

Mercedes is also making strides in the EV sector, with models like the EQA offering competitive range and charging times, while maintaining a premium interior at a reasonable price. Tesla's recent price cuts on the Model 3 indicate pressure to keep pace.

Could this lead to a shift in market dynamics, with Mercedes surpassing Tesla? Possibly, but Tesla's Dojo supercomputer may provide the necessary boost for their AI development, enabling them to advance in the autonomous driving landscape. Despite their upcoming Model 3 refresh and Cybertruck, if Tesla cannot achieve Level 3 compliance soon, they risk falling behind in the race for autonomous vehicles.

As for the future, the landscape remains uncertain, and investors will be watching closely to see how Tesla navigates these challenges.

Mercedes Benz critiques Tesla's self-driving tech, raising concerns about its impact on the car industry.

Chapter 2: The Future of Autonomous Vehicles

Mercedes claims to lead in "L3 Autonomous Driving," a development that could positively impact Tesla's future prospects.