The material handling industry is facing new challenges with the divergence from the established EUR-pallet. In correlation with the autonomous technology which is becoming more advanced, available and affordable than ever before, new demands are created. The industry calls for innovative material handling automated guided vehicles to meet the requirements. These vehicles will increase the owners profit by being more efficient in terms of time, size and cost. The aim for this study is to develop suitable lifting mechanisms for an ultra-compact automated guided vehicle. A generic product development process is utilized. The requirements for the lifting mechanism is defined and presented in a specification. A selection of employees are involved in the ideation and concept generation to add in-house knowledge and experience. The concepts are developed with component research, 3D visualizations and concept descriptions. The concepts are evaluated and the most promising are selected. The selected concepts are further developed with CAD-models, calculations and a selection of components. The concepts are compared with each other and the initial specification to assess the most suitable lifting mechanism. The single acting hydraulic system, including a Micro Power Pack and four small hydraulic cylinders, is considered the best suitable choice for an ultracompact material handling automated guided vehicle.