Merz was born in Esslingen am Neckar to Karl Gottlob Merz, a locksmith. He joined Daimler as a mechanic in 1906 and worked as a chauffeur and mechanic for several wealthy motorsport enthusiasts, including Theodore Dreher, an Austrian motor sport sponsor, and Saxon industrialist Willy Pöge.
On 28 June 1914, Merz was serving as chauffeur for Count Alexander von Boos-Waldeck during Archduke Franz Ferdinand's visit to Sarajevo. Merz drove the third car in the motorcade. During the first assassination attempt, Nedeljko Cabrinovic threw a bomb at the archduke's car; it bounced off and exploded under the wheels of Merz's car, injuring Boos-Waldeck, Eric von Merizzi, and several spectators. Later in the day, after the archduke's driver took a wrong turn, Gavrilo Princip stepped up to the car and shot Franz Ferdinand and his wife Sophie, killing them both. These killings triggered the chain of events that led to the First World War.
Merz took up racing in the early 1920s. He won at the Solitude Racetrack and the Klausen hill climb in 1924, and repeated at the Solitude Ring in 1925 in a four-cylinder two-litre Mercedes. In 1926 he won there again at an average speed of 57.29 mph (92.20 km/h) in a Porsche-designed straight-eight Mercedes.
His defining result came in July 1927 at the first German Grand Prix held at the newly opened Nürburgring. Driving a Mercedes SSK, Merz won the 316-mile (509 km) race, beating teammate Christian Werner by three minutes while racing alone without a co-driver for the entire 18 laps of the demanding Nordschleife circuit — an endurance feat that drew wide praise. The following year's German Grand Prix brought a second-place finish in sweltering conditions against a strong field that included Tazio Nuvolari, Louis Chiron, and Achille Varzi. Merz remained the sole driver of his Mercedes for the full race distance again.
Merz's participation beyond these highlights was intermittent. He raced at the 1929 Tourist Trophy in Ireland, where teammate Rudolf Caracciola won. In 1931 he shared Caracciola's Mercedes-Benz SSKL in the French Grand Prix at Montlhéry — a ten-hour race on the full 12.5 km circuit — before the car's supercharger failed after 39 laps. That year he also finished fifth at the German Grand Prix at the Nürburgring. He continued to work at Mercedes as an experimental and test driver, with racing appearances becoming increasingly rare.
Mercedes returned to racing in 1933, targeting the Avusrennen in Berlin where government dignitaries were expected to attend. With Caracciola sidelined by injuries suffered in a practice accident at Monaco, Merz was given the streamlined SSKL prepared for the event. He was forty-three, largely semi-retired from racing, and his presence surprised outside observers.
The first official practice session on 18 May 1933 took place in heavy rain. Merz and Manfred von Brauchitsch were testing their SSK streamliners in those conditions. Witnesses reported both cars sliding repeatedly. Shortly after 13:00, Merz crashed on the long straight near the Grunewald station, overturning approximately 2 km from the finish line. The car struck a cement milestone and rolled several times. Merz was ejected from the vehicle and found on his back on the right side of the track. He was transported to the Hildegard Hospital in Charlottenburg but died of his injuries.
Subsequent investigation found that the streamlined body of Merz's SSK, built at the Mercedes Sindelfingen works, curved sharply downward at the rear — unlike the higher-tailed body on Brauchitsch's car modified by König-Fachsenfeld. This configuration was far more likely to generate aerodynamic lift at high speed. The accident's characteristics led many experts, including Karl Ludwigsen, to conclude that aerodynamic lift probably played a significant role in the crash.
Merz occupied an unusual position within 1920s motorsport: a factory employee and working-class mechanic who could hold his own against the era's top Grand Prix drivers on the right circuit. His physical strength — reportedly able to hammer nails through wood with his bare hands — and his unflappable endurance over long race distances made him a popular figure with German racing fans, earning him the informal title of "the colossus." His connection to Sarajevo in 1914 adds a peculiar historical dimension to a career that otherwise unfolded entirely within the German motorsport establishment.