BERLIN - In an effort to compete with Tesla and Chinese newcomers, Mercedes-Benz announced on Wednesday that it has partnered with Google on navigation and will provide "super computer-like performance" in every vehicle equipped with automated driving sensors.

Both new and seasoned automakers are vying to match Tesla's software-powered innovations, which enable remote updates to a vehicle's performance, battery life, and self-driving capabilities.

In order to reduce the upfront cost of purchasing pricey high-powered semiconductors, the German automaker agreed to share revenue with semiconductor manufacturer Nvidia Corp., its partner on automated driving software since 2020, Chief Executive Ola Kaellenius said on Wednesday.

He claimed that the sunk costs would be low even if drivers did not activate every feature made available by the chip, arguing that you should only pay for a heavily subsidized chip and then figure out how to maximize joint revenue.

Lidar sensor technology and other hardware for automated "Level 3" driving, which have a higher variable cost, would only be available to customers who paid for an additional option package, according to Kaellenius.

Mercedes owns a small stake in self-driving sensor manufacturer Luminar Technologies Inc., which announced on Wednesday that it had reached a multi-billion dollar agreement with the automaker to integrate its sensors into a variety of its vehicles by the middle of the decade. This news sent Luminar's shares up over 25%.

Mercedes detailed the strategy behind a process that has been ongoing at the automaker for years to move from a patchwork approach integrating software from a range of suppliers to controlling the core of its software and bringing partners in at a software update day in Sunnyvale, California.

It generated over one billion euros ($1.06 billion) in software-enabled revenues in 2022, and it anticipates that after launching its new MB.OS operating system in the middle of the decade, that number will increase to a high single-digit billion euro figure by 2030.

As a percentage of total revenue, this estimate is more conservative than those made by companies like Stellantis and General Motors.

"We take a prudent approach because no one knows how big that potential pot of gold is at this stage," Kaellenius said.

Mercedes claimed that its partnership with Google would enable it to provide automatic rerouting and traffic information in its vehicles.

When the vehicle is parked or in Level 3 autonomous driving mode, which permits a driver to take their eyes off the wheel on specific roads as long as they can resume control if necessary, drivers will also be able to watch YouTube on the entertainment system.

Other automakers, including Ford , General Motors, Renault, Nissan, and Nissan, have integrated a full suite of Google services into their cars, providing tools like Google Maps, Google Assistant, and other programs.

According to the company, all cars using Mercedes' upcoming modular architecture platform will also feature so-called "hyper screens" that span the entire interior of the vehicle.