Core Insights - Mercedes-Benz and ByteDance have announced an upgraded partnership, with the new electric CLA model set to feature the "Doubao" large model, marking a significant collaboration beyond a typical supplier-manufacturer relationship [1] - The global sales of smart vehicles are projected to reach 66.2 million units in 2024, with a compound annual growth rate (CAGR) of 10.5% from 2019 to 2024, and expected to hit 92.1 million units by 2029, with a CAGR of 5.9% from 2025 to 2029 [1] - Mercedes-Benz's sales revenue for the first half of this year was €66.377 billion, a year-on-year decline of 8.6%, with pre-tax net profit plummeting 40.7% to €4.534 billion and post-tax net profit dropping 55.8% to €2.688 billion [1] Market Dynamics - The AI+ automotive market is experiencing rapid growth, with major players like Alibaba, Tencent, and Huawei joining the automotive sector, indicating a shift from consumer internet to industrial internet [2] - The collaboration between Mercedes-Benz and ByteDance represents a critical step in integrating AI into the automotive industry [2] Competitive Landscape - Traditional luxury brands like Mercedes-Benz are facing intense competition from domestic brands in China, which have advanced significantly in smart cockpit and advanced driver assistance systems [4] - The importance of smart features in consumer purchasing decisions is increasing, with 94% of Chinese automakers planning to incorporate AI-based solutions in new vehicles [5] Sales Performance - Mercedes-Benz's global sales in Q3 2025 were 525,300 units, reflecting a year-on-year decline of 12% and a quarter-on-quarter decline of 4%, with a total of 1.6016 million units sold in the first three quarters, down 9% year-on-year [5] - In China, Q3 deliveries fell by 27% year-on-year to 125,000 units, with total sales for the first three quarters at 418,000 units, down 18% year-on-year [5] Strategic Initiatives - To regain competitiveness in China, Mercedes-Benz has announced a significant investment plan of €14 billion, aiming to launch seven dedicated models in the next two years [6] - The partnership with ByteDance is seen as a way for Mercedes-Benz to quickly address its technological shortcomings and appeal to younger consumers [7][9] Technological Integration - The collaboration aims to enhance Mercedes-Benz's smart solutions, particularly in areas like in-car interaction and scenario linkage, which are critical for modern consumer expectations [8][19] - The partnership is expected to provide Mercedes-Benz with a mature smart solution, reducing development risks and improving efficiency [10][11] Industry Trends - The automotive industry is witnessing a shift towards AI and smart features, with a predicted market size of $5 billion for AI cockpit functions by 2027, growing at a CAGR of over 25% [17] - The integration of AI in vehicles is becoming a new selling point, with numerous collaborations between AI companies and automakers emerging globally [15] Challenges Ahead - Despite the potential benefits of the partnership, Mercedes-Benz's challenges in the smart technology space are significant, with competitors already well-established in this area [13] - The reliance on external AI solutions may lead to a hollowing out of Mercedes-Benz's internal R&D capabilities, posing risks to its long-term brand value [23][24]

Core Viewpoint - The traditional luxury car giants BBA (BMW, Mercedes-Benz, Audi) are collectively facing growth bottlenecks, with declining revenues and profits, particularly in the Chinese market, indicating a deep transformation pain that requires immediate and decisive action to recover and seize future opportunities [1][3][6]. Group 1: Financial Performance - In the first half of 2025, BBA's financial results showed a trend of "two declines and one increase" in revenue, with all three companies experiencing a "full-line decline" in net profits [3][6]. - BMW led with a revenue of €67.685 billion, despite an 8% year-on-year decline; Mercedes-Benz followed with €66.377 billion, suffering the largest revenue drop of 8.6% and a net profit halved; Audi was the only brand with revenue growth, reaching €32.573 billion, but its net profit was only €1.346 billion, one-third of BMW's [3][6]. - The decline in performance has led BBA to lower their profit forecasts, with Audi adjusting its annual revenue target to €65-70 billion and profit margin expectations down to 5-7%; BMW expects a decrease in profit margin to 5-7%; and Mercedes-Benz anticipates lower sales than the previous year, adjusting its return on sales from 6-8% to 4-6% [6]. Group 2: Market Challenges - BBA has collectively lost ground in the Chinese market, which is their most important single market globally, with delivery volumes declining by 15.5% for BMW, 14.2% for Mercedes-Benz, and 10.3% for Audi [5][6]. - The entry-level models of BBA, priced between 200,000 to 400,000 yuan, are facing fierce competition from domestic brands, leading to a decline in both volume and profit [8][9]. - BMW's popular models, such as the X3/X4 and i3/i4, saw delivery declines of 24.6% and 70.8%, respectively, indicating significant pressure in the mid-range segment [8][9]. Group 3: Electric Vehicle Transition - The shift to electric vehicles (EVs) is seen as essential for BBA's recovery, with distinct strategies emerging: BMW is leading, Audi is gaining momentum, while Mercedes-Benz is lagging [11][12]. - Audi reported a 32.3% increase in pure electric vehicle sales, achieving a penetration rate of 12.8% with 101,400 units delivered; BMW's electric vehicle sales reached 220,600 units, up 15.7%, while Mercedes-Benz's sales fell by 14% to 87,300 units [15][16]. - BMW is focused on a clear electric future, with plans for a new generation platform expected to boost electric vehicle sales significantly, aiming for 50% of its sales to be electric by 2035 [16][17]. Group 4: Strategic Adjustments - Audi has adopted a more cautious approach to its electric vehicle strategy, delaying the complete phase-out of combustion engines and planning to launch new internal combustion and hybrid models from 2024 to 2026 [16]. - Mercedes-Benz has adjusted its electric vehicle strategy, aiming for a maximum of 50% of its sales to be new energy vehicles by 2030, while still planning to introduce new electric models [17]. - The BBA's transition to electric vehicles is characterized by a pragmatic return to rationality, facing the dual challenge of accelerating the transition while addressing shortcomings in smart technology [18].