Business

Amazon Buys Zoox: Why Self-Driving Technology Is Existential

This week Amazon agreed to pay roughly $1.2 billion for Zoox, which is a developer of autonomous vehicles. Keep in mind that the startup had raised $1 billion from venture capitalists. In other words, the deal was not accretive.

Over the years, Amazon has invested in a variety of self-driving auto startups, such as Aurora Innovation and Rivian Automotive. But this is the company’s first acquisition in the space.

So then, what is the rationale for buying Zoox? Might we ultimately see Amazon autonomous cars on the highway? Or does the company have something else in mind?

Mark Siegel, a partner at Menlo Ventures

Amazon is interested in this for last mile delivery. Makes total sense as this is the logistically toughest and most expensive (per pound) part of the journey, and getting rid of the human labor will be a drastic cost reduction. I’m not positive exactly what that is for last mile, but in long haul trucking, it is nearly 40% of the cost.

Future trends: AVs will happen. Full Level 5 autonomy (no safety driver, any point to any other point) is lot further away than people generally think. It makes sense for Amazon to invest in this because of the immense capital they can throw at it, and a very long time horizon.

And it they will have such an enormous fleet and high utilization, so it makes sense to own rather than buy vehicles from a 3rd party.

Gautam Narang, the CEO and co-founder of Gatik

The deal is a validation for the AV delivery space. The last decade was heavily focused on warehouse automation, and this decade is all about automation of on-road transportation networks. Amazon made the right move in 2012 with their purchase of Kiva. Their purchase of Zoox is a clear indication they’re targeting the same impact with autonomous delivery.

It’s also inline with everything we hear from our customers, and what we have known for some time—optimizing the micro fulfillment center distribution model with automation is the only way that retailers will be able to keep up with consumer demand, and continue to add to their profit margins.

Dr. Charla Griffy-Brown, a professor at Pepperdine Graziadio Business School:

The Zoox purchase makes sense given Amazon’s 210 patents on everything from drones to automated ground vehicles. Amazon is already developing a drone delivery service through Amazon Prime Air. This also enables the company to compete across several industry verticals which will be transformed post-COVID19. This is a sign that Amazon is using its resources and building the opportunity for extraordinary innovation where it will prepare and then accelerate during economic recovery.

David Somo, the senior vice president of corporate strategy, marketing and solutions engineering at ON Semiconductor:

Amazon likely acquired Zoox to increase automation in its distribution network, particularly the “last mile” delivery service. This should drive operational efficiencies, scale and eventually result in substantial cost savings across their distribution network. I think it is unlikely that Amazon intends to operate a fleet of autonomous vehicles for passenger ride sharing and compete with the likes of Uber of Lyft.

James Gowers, the VP Strategy & Business Development at Perceptive Automata:

For some companies, including Amazon, having access to autonomous driving technology is an existential issue. The autonomous train has left the station and key players need a seat on that train.

While Amazon already has an internal team working on automation, acquiring Zoox gives Amazon an immediate boost in scale and sophistication. The autonomous driving challenge is very hard and so is the recruiting of talent. While the official announcement emphasizes that Zoox will continue to work on the robotaxi application, the core “driving software” that Zoox is developing can be deployed also for vehicles delivering goods instead of people. The transferability to trucking isn’t seamless—it would need some adjustment—but if Zoox is building its AV system with this kind of flexibility in mind (similar to Aurora) then the transfer to trucking will be practical.

Ted Serbinski, the Managing Director of the MetLife Digital Accelerator powered by Techstars:

Amazon’s goal is to drive the costs of shipping to as close to $0 as possible. Their largest cost is paying humans. The more that can be automated, the cheaper for Amazon and cheaper for us consumers. Fully autonomous, electric delivery systems reduce their cost structure significantly.

Source
forbes

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