The Austro-Hungarian consul in Nice in 1901 was Emil Jellinek and in 1899 he ordered several racing versions of the Phoenix car which had been built by the Cannstadt-Daimler company. Jellinek tried out the new car during the Nice Speed Week in March 1899 and did not like it. He tried again the following year but on the La Turbie hillclimb Wilhelm Bauer crashed one of them and was killed. Jellinek suggested that Gottlieb Daimler build another racing car for 1901 and commissioned a run of 36 of them. Daimler agreed to call the cars Mercedes after Jellinek's daughter. The new car was an immediate success with Wilhelm Werner winning the flying kilometer competition during the Nice Speed Week and winning the Nice-Salon-Nice race. In 1902 Count Louis Zborowski acquired one and finished second in the Paris-Vienna road race and fourth on the Circuit des Ardennes. In 1903 Camille Jenatzy won the Gordon Bennett Trophy race at Athy in Ireland in a Mercedes and the following year there were further successes with more and more developed racing models. When Grand Prix racing began in 1906 Mercedes entered a three-car factory team for the event at Le Mans for Jenatzy, Count Vincenzo Florio and a local driver called Mariaux. The following year the Grand Prix de l'ACF was held at Dieppe and Mercedes again had three cars with Jenatzy being joined by Otto Salzer and Victor Hemery. The event was repeated at Dieppe in 1908 and Mercedes had new 12.8-liter cars with Salzer being joined by Willy Poge and Christian Lautenschlager. Lautenschlager won the race. With Grand Prix racing petering out in Europe, Mercedes looked to the United States and in 1911 Ralph DePalma finished second in the Vanderbilt Cup in one of the cars, winning the event the following year. In 1913 the cars reappeared in Europe, Theodore Pilette (the Belgian Mercedes agent) finishing third in the Grand Prix de l'ACF at Le Mans.
The following year Daimler produced a new 4.5-liter car and in 1914 Lautenschlager, Louis Wagner and Salzer finished a dominant 1-2-3 in the Grand Prix de l'ACF at Lyon. It is often said that the 1914 Mercedes Grand Prix team was the first occasion on which a racing team approached the sport as a technical exercise. During the war years in Europe DePalma continued to be successful in the United States with victories at the Chicago Cup and Elgin Trophy in 1914 and in the Indianapolis 500 in 1915.
Germany's defeat and humiliation after the war meant that a return to racing was not possible until 1922 when three of the old 1914 cars were entered on the Targa Florio for Lautenschlager, Salzer and Count Giulio Masetti, who had rented the third factory entry. The Italian won. The cars were updated as much as was possible and did well on hillclimbs until 1927. Mercedes entered a factory team at Indianapolis in 1923 and in 1924 ran cars on the Targa Florio and briefly at the Italian GP although the entries were withdrawn when Count Louis Zborowski was killed.
In 1926 the Daimler company merged with Benz and the cars became known as Mercedes-Benz. The company's new president was Wilhelm Kissel and he appointed Alfred Neubauer to be head of the competition department. The early years were difficult as the company had no Grand Prix program and all events were undertaken with stripped-down versions of Ferdinand Porsche's SSK sportscar. These had occasional outings in 1928 and 1929 with driver Rudi Caracciola. Neubauer also ran low-key Le Mans 24 Hours programs in 1930 and 1931.
By the middle of 1931 Mercedes-Benz was running official teams again and the first major victory came for Caracciola in August that year at AVUS in a stripped-down SSK. During 1933 the company ordered engineer Hans Niebel to design a new Grand Prix car. The result was the Mercedes-Benz W25 which appeared at the start of 1934, winning on its debut in the Eifelrennen at the Nurburgring. Niebel died at the end of the year but his place was taken by Otto Schilling and Neubauer's team won three Grand Prix victories that year. In 1935 the W25s were becoming hard to beat with Caracciola and Luigi Fagioli winning 10 major races between them. The 1936 car was not a success but the arrival of a new young engineer called Rudolf Uhlenaut to help Schilling produced the W125 and Caracciola, Von Brauchitsch and Hermann Lang won seven victories. The new 3-liter formula resulted in the W154 and it was rarely beaten before World War II broke out.
After the war Mercedes-Benz had lost most of its factories and it took a long while to recover. By 1951, however, Neubauer was able to run three pre-war cars in Formula Libre races in Argentina. This was not very successful but the company then embarked on a sportscar racing program with the 300SL. In 1954 the firm returned to Grand Prix racing when the new 2.5-liter formula began. The company produced the W196 and it was dominant in Formula 1 in 1955, Juan-Manuel Fangio winning the World Championship. In the middle of the year, however, the company's involvement in the Le Mans disaster led Mercedes-Benz to withdraw from competition again.
The Mercedes-Benz car company flourished in the 1960s and 1970s but stayed away from competition. In 1979 the company prepared a number of 450 SLC models for rallies in Africa and Hannu Mikkola finished second on the Safari Rally and at the end of the year Mikkola, Bjorn Waldegard and Andrew Cowan finished 1-2-3 on the Bandama Rally. There was a limited program the following year with a second victory on the Bandama Rally, this time for Waldegard.
In May 1984 the company prepared a fleet of 190Es for a special Mercedes-Benz Cup at the opening of the new Nurburgring. It was won by Ayrton Senna. That year pressure began to grow on Mercedes-Benz to help privateers develop the 190E for the Group A regulations. At the same time Swiss team owner Peter Sauber decided that a five-liter Mercedes V8 would be a good engine for Group C sportscars and began development work. The following year he found backing from perfume company Kouros and Mike Thackwell and Henri Pescarolo won the Nurburgring 1000.
At the start of 1987 Mercedes-Benz's new chairman Professor Werner Niefer began to evaluate a more aggressive policy for the company in motorsport. The result of this was that in December 1987 Mercedes-Benz announced that it was opening a competition department to look after Sauber in Group C and various teams running Mercedes 190Es in Group A touring car racing. Norbert Haug was appointed to head the division.
Sauber received sponsorship from Mercedes-Benz sister company AEG and the team won five victories that year, taking Jean-Louis Schlesser to second place in the World Championship. In 1989 the cars were painted silver and became official Mercedes entries. The team won seven of the eight rounds of the World Championship, both titles and scored a 1-2 finish in the Le Mans 24 Hours. The 1990 season was another success with eight wins in nine races and twin titles again. At the same time Mercedes created a Junior Team car for youngsters Michael Schumacher, Karl Wendlinger and Heinz-Harald Frentzen.
Preparations began for Sauber and Mercedes to enter F1 together but in December 1991, because of the recession at the time, Niefer canceled plans to enter F1. Sauber went ahead on his own - discreetly supported by Mercedes. The first year was promising and so in 1993 the Ilmor engines used by the team became known as Sauber V10s. In 1994 they became Mercedes-Benz V10s after the company bought a 25% shareholding in Ilmor Engineering.
There was success too in touring car racing with Helmut Marko running a private Mercedes 190E for Volker Weidler in the DTM in 1986. The car finished second in the championship. In 1988 AMG and Snobeck began to receive assistance but it was not until 1992 that Klaus Ludwig finally won the title in an AMG car. He repeated the success in 1994 while Bernd Schneider won the International Touring Car Championship in 1995 in a Mercedes C-Class.
Mercedes-Benz entered CART racing in 1994 building a special one-off engine for Al Unser Jr. The Formula 1 program of 1994 was not a success and Mercedes dropped Sauber and went into partnership with McLaren. The result was not an immediate success but by the end of 1997 Mika Hakkinen was able to open another chapter of Mercedes-Benz success in Grand Prix racing with a win at the European GP at Jerez. In America Mercedes engines scored six CART wins in 1995 and in 1997 the Penske, Forsythe and PacWest teams collected nine victories. The success in America then waned against strong opposition from Honda with Forsythe's Greg Moore winning only three times in 1998 and 1999. He was killed at the end of 1999 in an accident at California Speedway.
Mercedes re-entered sportscar racing in 1997 with AMG fielding a team in the new FIA GT Championship. The cars scored six wins and Bernd Schneider won the World Championship while the team ran young drivers Ricardo Zonta and Mark Webber. In January 1999 AMG was bought by Mercedes-Benz. The team ran into trouble in 1999 when the cars suffered an alarming series of flips at Le Mans. Fortunately none of the drivers were hurt but the team was forced to withdraw.
In July 1999 Mercedes-Benz announced its intention to buy 40% of the McLaren F1 team and that deal was completed in January 2000.