Amazon vs Tesla? Retail giant may buy Cannon-Brookes backed AV start-up Zoox

Could Amazon be making plans to rival Tesla’s planned robo-taxi fleet?

The retail giant’s interest in buying autonomous vehicle startup Zoox, as reported by the Wall Street Journal on Tuesday, is most likely motivated by cutting delivery costs for its retail business, but other possibilities have analysts abuzz.

Readers will remember that in December 2019, Australian tech entrepreneur Michael Cannon-Brookes, whose venture capital company Grok Ventures is a major backer in Zoox, said he expects that “robot cars” will be a reality by 2021. He is believed to have invested a significant amount of money into the company.

The “advanced talks” between Amazon and Zoox covered exclusively by the WSJ come after The Information reported that the self-driving startup was looking for a buyer, or a fresh round of funding to help it remain independent.

Now, it has been reported that Amazon’s talks to close a deal with Zoox would value it at less than the $US3.2 billion ($A4.8 billion) it last raised in 2018 after its initial $US955 million ($A1.44 billion) fundraise in 2014.

Zoox’s self-driving vehicle technology seeks to achieve fully-autonomous driving in complex environments. It is one of a handful of companies putting serious dollars into developing autonomous technology, such as Tesla, Google’s Waymo, and GM’s Cruise.

While Tesla is implementing its Full Self Driving package incrementally to Tesla vehicle owners using in-built sensors placed around the vehicle body, Zoox’s technology uses 360-degree sensors placed on top of the vehicle.

Zoox has begun releasing a series of videos demonstrating its technology including 1-hour drives through the busy Californian cities of Las Vegas and San Francisco.

Neither company has confirmed the acquisition talks, but there is speculation that it would give Amazon room to expand into another potentially lucrative market – autonomous taxis and ride-sharing.

In a note following the WSJ report, Morgan Stanley analyst Brian Nowak laid out four reasons he thinks the deal could be a good move for Amazon.

Cutting shipping costs – tipped to reach $90 billion in coming years according to Barron’s – is top of the list, and is central to his first three points. “In our view, the value of cost-effective shipping is likely to only rise given the inflection we are seeing in e-commerce in 2020,” Nowak said.

In Nowak’s view, the merger could help Amazon achieve a more efficient delivery network, as well as realise long-term savings. Additionally, he sees an opportunity in autonomous technology playing a key role in Amazon’s plans to compete against US logistics giants UPS and Fed Ex.

But the real potential could be in expansion into ride-share and food-delivery networks, says Nowak.

“If confirmed, we see this as further evidence that the ‘teracap’ platforms [companies with market caps over $1 trillion] are a force to be reckoned with in the [autonomous-vehicle] race,” Barron reported Nowak as writing.

“In a post-Covid world, we believe fewer and more powerful players will be in a position to deploy capital and talent to solving autonomy with a ‘play to win’ mindset.

“We see Amazon (and other tech players) as clear competitors, not partners, versus the likes of Tesla and General Motors.”