Why Luminar's Mercedes-Benz Deal Is So Significant

The Motley Fool
The Motley Fool

News that lidar start-up Luminar (NASDAQ: LAZR) has secured a deal with -- and an investment from -- German luxury-car stalwart Mercedes-Benz sent Luminar's stock soaring on Thursday: As of 2:30 p.m. ET, it was up about 17.1% from Wednesday's close.

The stock price surge might actually be justified. Luminar's intense focus on making automotive-grade units that can be mass-produced at relatively low cost has helped it stand out amid a crowded field of lidar start-ups.

The auto industry has already taken notice. Luminar last year announced deals with other automakers, including Volvo and China's SAIC.

But this deal with Mercedes is the first that anticipates high production volumes. That says a lot about the readiness of Luminar's technology. The decision by Mercedes' parent Daimler (OTC: DMLR.Y) to take a stake in Luminar says even more.

Luminar offers two different lidar systems. One, the Hydra, is a complex unit designed primarily for self-driving test and development programs.

It's the second unit, called Iris, that drew Mercedes' interest.

Luminar's Iris is a low-cost lidar sensor designed for mass-produced vehicles. Image source: Luminar.

Iris is expected to become Luminar's core product. It's a slim rooftop lidar sensor unit that is designed for production runs of at least 10,000 vehicles. The Iris unit can spot objects up to 600 meters away, and can reach 250 meters with at least 10% reflectivity, a key metric for nighttime use.

Luminar expects to begin series production of the Iris units by the end of this year, as its first vehicle program, with Volvo, gets underway.

We don't yet know when Mercedes will launch a production vehicle that incorporates Luminar's lidar units, and we don't know how many the automaker expects to build. But the clear hints are "soon" and "a lot," and that makes this a very important deal for Luminar's future.

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John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

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