Born in Magstadt, Kingdom of Württemberg, near Stuttgart, Lautenschlager began training as a machinist at age 14. After working at various positions and travelling across Europe, he returned to Stuttgart in 1899 and joined the Daimler factory. There he progressed through the ranks as a mechanic and eventually took on the role of test driver for the company's racing cars. Because the Daimler name had been licensed away in several markets, the cars competed under the Mercedes brand — a name that would become synonymous with Lautenschlager's greatest victories.
For the 1908 French Grand Prix at Dieppe, France, Lautenschlager was given the opportunity to drive one of three Mercedes Grand Prix cars. He drove to a commanding victory ahead of two Benz-mounted French rivals, establishing himself as one of the foremost racing drivers in Europe. After this triumph, Lautenschlager returned to his factory work rather than committing to a full racing career, a pattern that defined his relationship with the sport throughout his life.
In 1914, Lautenschlager raced at the Elgin Road Races in Illinois before travelling to Lyon, France, for the French Grand Prix on 4 July 1914. The race entered history on multiple fronts. Held just days after the assassination of Archduke Franz Ferdinand in Sarajevo, with international tensions already running high, it proved to be the last major Grand Prix before World War I brought European motor racing to a halt. The event was notable for being the first Grand Prix with a strict engine displacement limit, set at 4.5 litres, attracting 37 cars from 13 manufacturers across six countries.
Lautenschlager faced stiff competition from Georges Boillot, the French favourite who had won the race in both 1912 and 1913. After seven gruelling hours of racing, Lautenschlager led Mercedes to a celebrated 1-2-3 finish, taking the victory for the second time in his career. The result was seen in France as a national blow coming at such a politically fraught moment, and the race itself has been regarded by historians as one of the great Grand Prix events in motor racing history.
In the early 1920s, when Lautenschlager was in his forties, he returned to racing on a semi-regular basis with limited success. He finished tenth in the 1922 Targa Florio. In 1923 he travelled to the United States as part of a three-car Mercedes team for the Indianapolis 500, driving one of the first cars in the race's history to be equipped with a supercharged engine. The effort was not competitive, and he finished 23rd. He retired from racing the following year.
Lautenschlager remained employed at Daimler until retirement, and the company he served outlasted the war and the Weimar era to merge the Daimler and Benz operations in 1926 as Mercedes-Benz. He died on 3 January 1954 in Untertürkheim, a suburb of Stuttgart, aged 76. His two French Grand Prix victories — bookending the pre-war golden age of European motor racing — remain his defining achievement, and the 1914 triumph in particular has been studied as one of the most dramatic finishes in Grand Prix history.