Mercedes-Benz has selected China’s Hesai to supply lidar sensors for its smart driving vehicles in global markets, marking the first time a foreign automaker has adopted Chinese-made lidar technology for models sold outside China, a person familiar with the matter said according to a report by Reuters.
The decision comes amid escalating trade tensions, with the United States increasing restrictions on Chinese components and software in vehicles developed by global automakers. However, German automakers, key players in their country’s economy, are under pressure to remain competitive.
Mercedes had deliberated for months due to legal and geopolitical risks before choosing Hesai, China’s largest lidar maker, based on cost advantages and its ability to manufacture at scale, the source added.
Hesai Secures Multi-Year Lidar Contract
Hesai announced on Monday an “exclusive multi-year” contract to supply lidar sensors to a leading European automaker but did not name the company.
Lidar technology uses laser-based sensors to create 3D maps of a vehicle’s surroundings, enabling advanced driver assistance and autonomous driving systems. Many automakers, including Mercedes-Benz, have been integrating lidar into their smart driving platforms.
See also: Mercedes-Benz Gains Approval for Marker Lights in Automated Driving Trials
Hesai’s Chief Financial Officer Andrew Fan said on Tuesday that the automaker’s decision was purely commercial. “I assume the automaker has to find alternatives that can be comparable to Hesai’s products on performance and price, but the result is there is none,” Fan said.
European carmakers have previously sourced Hesai’s lidar for vehicles sold in China, he added.
Hesai Expands Global Production
To meet increasing demand, Hesai is scaling up production, expanding two domestic lines in China to reach an annual capacity of over 2 million units this year.
The company is also setting up overseas production lines to mitigate tariff and logistics risks for clients outside China, with plans to launch as early as next year. However, Fan declined to disclose the factory’s location.
In China, lidar demand continues to grow as automakers incorporate smart features into more affordable models. On Monday, Leapmotor launched its B10 SUV, featuring Hesai’s ATX lidar, priced at around $200 per unit. “It’s now cheaper than safety belts and airbags,” Fan noted.