BMW and Mercedes take on Tesla with new luxury SUVs

German carmakers are relying on Silicon Valley to turn their cars into giant smartphones on wheels

- Stephen Wilmot

Tesla's Model Y was a game-changer in the auto industry, blowing away fusty old manufacturers to become the bestselling vehicle globally. Now the world's top luxury car brands are fighting back.

In recent days, BMW and Mercedes-Benz have revealed new electric sport-utility vehicles—a category dominated by the Model Y—that will test car buyers' appetite for expensive European brands at a time when technology from the U.S. and China increasingly sets the auto industry's agenda.

The fruits of billions of dollars of investment, the SUVs will travel farther and charge faster than most of today's electric vehicles. They will also put smartphone-inspired technology at the heart of the vehicle, allowing drivers to connect to cutting-edge artificial intelligence on the go and manufacturers to send more software updates remotely.

Mercedes took the wraps off its electric GLC in Munich's former royal palace on Sunday, ahead of IAA Mobility, Europe's most important car show. Two days earlier, BMW Chief Executive Oliver Zipse had shown off the company's new iX3 at an event he called a "once-in-a-lifetime moment" for his team.

"When else do you get to reimagine a brand like BMW from the ground up?" Zipse asked the crowd.

Whereas Tesla developed much of its technology in-house, the German companies are relying on partnerships with Silicon Valley to turn their vehicles into giant smartphones on wheels.

Chip designers from the U.S. and China increasingly sets the auto industry's agenda. Nvidia and Qualcomm are helping Mercedes and BMW, respectively, to achieve a higher level of autonomous driving. The so-called virtual assistant in the new Mercedes GLC can do everything from find nearby restaurants to open the windows, thanks to AI from Alphabet's Google and OpenAI's ChatGPT.