The Match & Mismatch Of Amazon Buying Self-Driving Unicorn Zoox, As Is Rumored.
by Brad Templeton
Reports surfaced, first in the Wall Street Journal of Amazon AMZN being in negotiations to buy Zoox, the self-driving unicorn. While it’s known that Amazon has self-driving and delivery robot ambitions, and of course immense piles of capital, it’s an unusual match. I reported on the implications of Zoox being for sale earlier in the month.
Rumors suggest a serious down-round, possibly as low as $1.1B according to one analyst. As only slightly more than the current invested capital, this would leave the founders and employees with a more meager return than they would hope, due to the preferences those investors will have to get their money out first. Normally in such situations a new option plan is created to keep people motivated.
It’s a strange match — a mismatch in some ways, but with some potential.
Zoox has always had a particular focus, to make a purpose-built robotaxi vehicle designed from ground up for its special goal. Amazon’s primary interest is seen as delivery, though it’s not out of the question that they could consider the lucrative passenger taxi service business that Zoox wishes to pursue. If not, Amazon might simply value a well-developed self-driving system, as that certainly takes work to build and develop, and time is very important in this game.
A delivery vehicle actually has worthwhile gains in being purpose built. You can take out the space for the driver and make it for cargo. You don’t need windshields or glass at all. You want a variety of sizes, from small to large. Amazon has been developing sidewalk delivery robots and of course runs a large fleet of bigger trucks.
Zoox has always been interested in how a custom-designed vehicle can offer things like 4 wheel steering, letting it turn in place, go forwards and backwards with equal ease, and possibly even go sideways. Such a vehicle would have an advantage in reaching certain drop-off spots to bring passengers to customers. Parcels, however, don’t really care which direction they are facing or care about backing out to turn around. And a small but more ordinary delivery robot like the Nuro should be able to make its way into small drop-off spots when reaching customers.
Zoox has also put a large focus on symmetry and redundancy in their vehicle design. Their original designs had 4 of everything from the wheels on up. That can make a very robust design, able to withstand failures, but the truth is that cargo isn’t usually in the same rush that people are. If a vehicle breaks down, you just dispatch another one (and a crew to move the cargo) and it’s cheaper than having 2 of everything in each vehicle.
The reports suggest other companies are still bidding, and Zoox will of course want to court all bidders and get the price up.
The creation of a robotic delivery fleet by Amazon would be a blow to large shippers like Fedex FDX and UPS. Amazon has become a huge shipper, and electric robotic delivery vehicles would be highly cost effective and efficient. While Amazon has pushed the world into pretending everything has free shipping, the reality of course is that the cost of shipping does matter. Amazon’s competitors would face an even harder battle fighting off the giant.
Let’s not forget, though, that Amazon is a giant tech company, and several of the other giant tech companies, like Google GOOGL and Apple AAPL , have started attempts at the passenger robotaxi business just to go after that business. People spend $5 trillion every year on ground transportation — it’s a bigger win than owning a chunk of all retail.
An automaker, or a tech company looking to enter the robotaxi business, would make a better suitor for what Zoox has built. And Amazon has needs far beyond last mile delivery, and will want a long haul trucking solution and inter-warehouse logistics. Amazon famously bought Kiva, a warehouse-robot company, early in its history for a near-$billion price and automated that part of the game years ago. The last remaining step will be automated pick-and-pack, which are still done by humans at Amazon. In a few years, it is likely many orders from Amazon might come to you without being touched by a person, something the Amazon workforce might not find pleasing.