Morgan Stanley estimates the e-commerce giant could save $20 billion a year in logistics costs by integrating the firm’s technology into its delivery infrastructure.
Why Amazon Wants to Buy Zoox
While Amazon is one of the world’s few trillion-dollar brands, the company’s profitability has suffered as it has built out its transportation network. In 2019, the firm spent $37.9 billion bringing goods to consumers, up 36.68 percent from 2018. Moreover, Morgan Stanley predicts the corporation’s annual logistics expenses could rise to $90 billion in the coming years.
The Seattle conglomerate is aware of the problem and has sought to lower its logistics costs in several different ways.
In 2019, Amazon participated in a $530 million fundraising round conducted by autonomous vehicle firm Aurora. The corporation also tested a small fleet of last-mile delivery robots called Scouts in its home state last summer. Earlier this week, reports emerged the company is looking to quintuple its air freight fleet by 2028.
Amazon has also ordered 100,000 battery-powered delivery vans from electric vehicle startup Rivian.
By purchasing Zoox, the corporation could move closer to automating a big part of its logistics operation. Bloomberg pointed out the acquisition could help the online retailer expand into the food delivery and ride-hailing sectors. Given its vast resources, the company could easily set itself up as a competitor to established players like DoorDash and Uber.
How Zoox Would Benefit From Being Acquired by Amazon
Founded in 2014, Foster City, California-based Zoox has been one of the leading lights of the emerging self-driving car industry. But it has experienced some stumbles on the path of launching a revolutionary transportation option. As such, being bought by Amazon could give it much-needed stability.
The startup has taken a holistic approach to the vehicle autonomy problem, developing a full-stack to handle automobile operation. The firm also sought to redefine the popular conception of driving, positioning its bi-direction electric sedans as a ride-sharing solution. The company’s robo-taxi ambitions attracted significant investor attention as it raised $500 million in outside funding in July 2018.
Five months later, the startup gained approval to test its autonomous cars in California, and it secured a $200 million cash infusion last summer. However, the company’s board of directors ousted co-founder and CEO Tim Kentley-Klay in August 2019 and laid off 120 contracted workers in the wake of COVID-19.
As such, Zoox’s promise of debuting a bi-directional self-driving vehicle in 2020 has come under scrutiny.
That said, the startup has recently shown intriguing signs of life, including posting YouTube videos documenting hour-long autonomous journeys in Las Vegas and Northern California. Together, the two clips showcase the firm’s car’s ability to navigate dense urban streets and busy freeways without driver intervention.
If Amazon buys Zoox, its staff would not have to worry about fundraising and could focus on product development. Judging by its recent videos, the firm is at a crucial phase in its growth. Conceivably, the e-commerce giant’s resources could provide the extra push the startup needs to win the vehicle autonomy race.