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Mercedes adding Luminar lidar to more vehicles in multibillion-dollar deal

Mercedes-Benz has agreed to a "multibillion-dollar" deal with Luminar to integrate lidar technology and software into the German automaker's next-generation of vehicles set to go into production by the middle of the decade.

The deal announced Wednesday during an event at the Mercedes-Benz Research and Development North America facility in Sunnyvale, California is an expansion of an existing partnership between the two companies. Luminar said it plans to build a factory in Asia to support the deal. Luminar didn't disclose the production capacity of this Asia factory. A company spokesperson did disclose that the new factory will be almost entirely dedicated to supplying lidar sensors to Mercedes.

Luminar shares popped more than 26% to $7.24 following the announcement.

A growing number of automakers, including Mercedes, believe that lidar, or light detection and ranging radar, is a necessary sensor used alongside cameras and radar to support automated driving features.

Under the newly expanded agreement, Luminar lidar and accompanying software will be integrated into a broad range of Mercedes' next-generation production vehicles. The Luminar lidar will be in Mercedes vehicles equipped with its Drive Pilot system, which allows for hands-free, eyes-off driving under certain conditions on highways.

Mercedes announced in January 2022 it would use Luminar’s lidar technology in future vehicles as part of a broader deal that includes data sharing and the automaker taking a small stake in the company. As part of the deal, Mercedes-Benz acquired up to 1.5 million Luminar shares, in exchange for certain data and services.

That initial development partnership, which has been underway since 2021, was limited to one high-end vehicle model. This newly expanded partnership will still include the data-sharing component and grow to multiple vehicle models. Luminar's next-generation Iris lidar, which is designed to meet Mercedes-Benz needs for its automated driving system, will go into production by mid-decade. Luminar's first-generation Iris lidar entered its series production in October 2022.

Mercedes said the lidar will not only support its conditional automated driving system Drive Pilot, it will allow the system to operate at speeds up to 80 miles per hour. Today, Drive Pilot allows for hands-free, eyes-off driving up to 40 mph on certain highways. It's only available in Mercedes S Class and Mercedes EQS vehicles in Germany. Drive Pilot-equipped vehicles, which currently use lidar from Valeo, will be available for sale in certain U.S. markets later this year.

Currently, only Nevada has certified the system for use in the state. Mercedes has also applied for certification in California.

"In a first step we have introduced a Level 3 system in our top line models. Next, we want to implement advanced automated driving features in a broader scale within our portfolio," Mercedes CTO Markus Schäfer said in a statement.