Picture: REUTERS
Picture: REUTERS

San Francisco/Seattle — Amazon’s talks to buy driverless vehicle start-up Zoox has analysts speculating the deal could save the e-commerce giant tens of billions a year and put vehicle, parcel and ride-hailing companies on their heels.

Shipping costs are one of Amazon’s largest expenses and may reach $90bn in the coming years, Morgan Stanley’s internet, automotive and transport analysts wrote in a report on Wednesday. An autonomous offering could save the company more than $20bn annually, they estimate.

“Autonomous technology is a natural extension of Amazon’s efforts to build its own third-party logistics network,” Morgan Stanley’s analysts wrote. They see the company being a “clear” competitor to the likes of Tesla and General Motors and the potential for Amazon to compete in ride-sharing and food delivery. United Parcel Service and FedEx “will have to respond to keep up”, too.

Other companies in the automotive and chip industries have also held talks with Zoox about a potential investment, according to people familiar with the matter. At least one business besides Amazon has offered to buy the company, they added. Zoox is unlikely to sell for less than the more than $1bn it has raised, according to the people, who asked not to be identified discussing private negotiations.

“Zoox has been receiving interest in a strategic transaction from multiple parties and has been working with Qatalyst Partners to evaluate such interest,” the start-up said on Tuesday. It declined to comment on Amazon’s interest. A spokesperson for Amazon declined to comment.

Zoox has outsize ambition and financial backing. The start-up wanted to build a fully driverless car by this year. However, after a 2018 funding round that valued Zoox at $3.2bn, the start-up’s board voted to oust CEO Tim Kentley-Klay. The executive criticised the move, saying the directors were “optimising for a little money in hand at the expense of profound progress”.

Dow Jones reported that Amazon is in advanced talks to buy Zoox for less than the $3.2bn valuation from 2018.

Amazon is willing to spend heavily to automate its e-commerce business. The online retail giant purchased warehouse robot-maker Kiva Systems in 2012 for $775m and now has tens of thousands of robots in warehouses around the world. But paying drivers to deliver packages is still one of the biggest costs in the company’s operation.

CEO Jeff Bezos announced plans for drone delivery in 2013, though that has yet to materialise at scale. Last year, Amazon revealed an experimental delivery robot called Scout in the Seattle area that rolls on sidewalks like a shopping cart.

Last year, Amazon invested along with Silicon Valley venture firm Sequoia Capital in self-driving start-up Aurora Innovation, a start-up led by the former heads of Google’s driverless car project and Tesla’s Autopilot team. Amazon also backed Rivian Automotive, the electric pickup and SUV maker. Those bets left Morgan Stanley’s automotive analyst questioning earlier this month whether Tesla’s rich valuation is warranted given the competitive threats the company faces.

“We often hear from investors that Tesla could potentially be the Amazon of transportation,” Adam Jonas, who rates Tesla the equivalent of a hold, wrote in a May 17 report. “But what if Amazon is the Amazon of transportation?”

Bloomberg

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