Long a major proponent of unmanned vehicles as a delivery tool, having explored various robotics and drones for fulfillment, Amazon made what could be its biggest investment yet in the technology, acquiring autonomous driving startup Zoox. Neither party disclosed the sum of the acquisition, which could be valued at as much as $1.2 billion, according to The Financial Times.
Amazon’s shipping costs in recent years have skyrocketed as the company continues to find new ways to expedite on-demand delivery . In the first quarter alone, shipping costs leapt 49 percent to $10.9 billion as the company fulfilled frenetic demand during the COVID-19 pandemic and struggled to keep pace with its one-day delivery commitment to legions of valuable Prime members.
The massive investment in an automated delivery solution would undoubtedly multiply these costs in the short term, but the interest in an unmanned service may further reveal that Amazon is looking to extend its future focus on driverless fulfillment across the board, which could slim the number of drivers employed. In fact, the Financial Times report quoted a Morgan Stanley analyst as estimating that Amazon could save up to $20 billion per year, with a “more efficient long-term delivery network” using Zoox technology.
A major acquisition like Zoox could have long-term implications for Amazon, especially as it continues to battle with competitors in the delivery space, namely UPS, FedEx and the USPS, as well as autonomous vehicle company Waymo, which is founded and backed by Google and has already secured $3 billion in funding in 2020.
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Amazon has leveraged major acquisitions to built out its fulfillment network in the past. While Amazon now has more than 200,000 robots operating in its warehouses, the roots of its business started off with its acquisition of Kiva Systems for $775 million in 2012. At the time, Kiva Systems was the only major manufacturer of warehouse robots and was supplying many different companies in the logistics market. But Amazon saw a major opportunity in the technology, integrated the tech in its warehouses and established its Amazon Robotics business out of it. In 2014, Amazon operated approximately 15,000 robots across its fulfillment network.
Zoox started in 2014 with the vision of purpose-built, zero-emissions vehicles designed for autonomous “ride-hailing,” along with an end-to-end autonomy software stack. Zoox’s vehicles are designed to focus on the ride-hailing customer, so as of now it appears the company is still looking to focus on building out a fleet of “robo-taxis.” The Zoox technology include wheels that can turn sideways for tight maneuvers, such as parallel parking. The company had been road testing its autonomous technology in retrofitted Toyota Highlanders around Las Vegas and San Francisco.
While this does directly not match Amazon’s delivery ambitions, Amazon hasn’t been shy about branching itself out into other businesses, so it’s tough to rule out whether the e-commerce giant wants to establish a presence in autonomous ride-hailing.
But Amazon has more skin in the delivery game, already having tested self-driving trucks developed by Embark to haul cargo on the I-10 interstate highway. In early 2019, Amazon led a $700 million investment in electric vehicle startup Rivian and also invested in self-driving technology company Aurora, helmed by the former head of Google’s self-driving car project.
Zoox will continue to operate as a standalone business, according to Amazon, with CEO Aicha Evans and co-founder and chief technology officer Jesse Levinson continuing to lead the company.
The autonomous driving startup was actually valued at more than $3 billion in 2018, so Amazon got the company at a discount. Zoox has seen its fair share of struggles throughout the COVID-19 pandemic, with the company cutting about 100 jobs, or 10 percent of its staff, in April, just after laying off about 120 contract workers amid California’s shelter-in-place orders.