Ama­zon starts to de­liver on driver­less am­bi­tion

The giant’s $1.2bn deal for Zoox does more than sim­ply ex­tend its Tesla feud, write Olivia Rudgard and Lau­rence Dodds in San Fran­cisco ‘I sus­pect Ama­zon will take the ve­hi­cle and turn it into some­thing like a mo­bile Ama­zon locker’ ‘Ama­zon has spent $10.9b

The Daily Telegraph - Business - - Technology Intelligen­ce -

What should you do when you are courted by two of the world’s rich­est men who both want the same rocket launch pad? This was the dilemma faced by Nasa in 2013 when one of its space shut­tle sites in Cape Canaveral, Florida, be­came the fo­cus of a pro­longed dispute be­tween Elon Musk and Jeff Be­zos.

Launch Pad 39A was cost­ing the US space agency around $100,000 (£79,000) per month. Both moguls wanted the lease for their ri­val space com­pa­nies SpaceX and BlueO­ri­gin. They waged a brief war of lob­by­ing and in­sults be­fore Musk won out.

That feud helps ex­plain why Musk re­sponded to Be­zos’s $1.2bn takeover of the self-driv­ing car start-up Zoox last month by pub­licly call­ing him a “copy­cat”. The Tesla and SpaceX bil­lion­aire seemed to be­lieve that Ama­zon was plan­ning to get into au­ton­o­mous ve­hi­cles – a field in which Tesla has am­bi­tious de­signs.

What may have been galling for Musk is that Ama­zon cut a good deal. Zoox, which has re­cently been burn­ing $30m per month, had pre­vi­ously been val­ued at $3.2bn.

“By all ac­counts, Zoox’s au­to­mated driv­ing sys­tem is one of the best out there,” says Sam Abuel­samid, an­a­lyst at Guide­house In­sights. “They have a very good team and they’ve de­vel­oped a very good sys­tem.”

Even with that solid rep­u­ta­tion, he says: “Zoox was in a po­si­tion where they needed to find a buyer.” The com­pany has raised $950m over the past five years but hasn’t com­pleted a suc­cess­ful fund­ing round since 2018. Plans to raise more money last year went awry due to a lack of in­vestors.

The deal, and the lower than ex­pected val­u­a­tion, is an­other sign that the self-driv­ing car bub­ble is fi­nally be­gin­ning to burst, be­lieves Abuel­samid. Progress has been slower than ex­pected across the board, and de­vel­op­ment is eye-wa­ter­ingly ex­pen­sive. Re­cent ca­su­al­ties in­clude au­ton­o­mous truck­ing com­pany Starsky Robotics, which failed in March. Drive AI was snapped up by

Ap­ple just as it was about to go un­der last year. A wave of con­sol­i­da­tion has seen Volk­swa­gen part­ner with AV com­pany Argo AI, Hyundai join up with Ap­tiv and Mercedes-Benz sign a deal with chip com­pany Nvidia.

Be­zos’s play for a slice of the au­ton­o­mous ve­hi­cle mar­ket might be a lit­tle op­por­tunis­tic, but it also holds huge po­ten­tial ben­e­fits.

More likely than a fu­ture in which we climb into Ama­zon-branded cabs and say “Alexa, take me to the opera”, Be­zos is dream­ing of a fleet of au­ton­o­mous, elec­tric Ama­zon de­liv­ery ve­hi­cles to smooth out his al­ready for­mi­da­ble lo­gis­tics op­er­a­tion.

Zoox’s con­ceit in the self-driv­ing car mar­ket is its fo­cus on de­vel­op­ing its pas­sen­ger ve­hi­cle from the ground up, rather than adding self-driv­ing tech­nol­ogy to an ex­ist­ing ve­hi­cle.

Ama­zon’s an­nounce­ments about the deal have pointed out Zoox’s fo­cus on pur­pose-built cars, not­ing that these are very dif­fer­ent to de­liv­ery ve­hi­cles.

Abuel­samid be­lieves that while Ama­zon might even­tu­ally plan to tackle the robo-taxi mar­ket, the short-term util­ity is likely in lo­gis­tics. “I sus­pect that Ama­zon will take that ve­hi­cle and adapt it for de­liv­er­ies, turn it into some­thing like a mo­bile Ama­zon locker for con­tact­less ur­ban de­liv­ery,” he says.

That type of ve­hi­cle would also be an eas­ier tech­ni­cal prospect than a self-driv­ing taxi, be­cause it could run slowly on pre-planned, pre­dictable routes, some­thing which is much more re­al­is­tic with cur­rent au­ton­o­mous tech­nol­ogy. Sanchit Jain, an e-com­merce spe­cial­ist at En­ders Anal­y­sis, is also scep­ti­cal. “It’s worth just dis­pelling straight away [the idea that] Ama­zon is pur­chas­ing Zoox to get into the robo-taxi game,” he says.

Be­zos, a savvy businessma­n, might see short­com­ings in the prof­itabil­ity of the sec­tor. A study last year found au­to­mated taxi ser­vices might be be­tween twice or eight times as ex­pen­sive as hu­man ones, po­ten­tially wip­ing out the per­son­nel sav­ings on which com­pa­nies such as Uber have pinned their hopes.

Last year, Ama­zon in­vested $700m in Ri­vian, an elec­tric van maker, with the in­ten­tion of de­car­bon­is­ing its mas­sive de­liv­ery op­er­a­tion. The com­pany has in­creas­ingly stepped away from es­tab­lished de­liv­ery part­ners such as FedEx and UPS in favour of or­gan­is­ing its own de­liv­er­ies.

“Ama­zon spent $10.9bn in world­wide ship­ping costs,” says Jain. “That’s up from $7.3bn the same time last year. It’s a mas­sive cost, and it’s only go­ing to in­crease as they in­vest more in one-day ship­ping... With a fleet of elec­tric au­ton­o­mous ve­hi­cles, they could ser­vice cus­tomers 24/7, and they don’t need to worry about a driver be­ing tired.”

That would let Ama­zon cover the fa­mous “last mile” of de­liv­ery far more ef­fi­ciently, re­duc­ing the cost of ex­pan­sion. Jain be­lieves Ama­zon is ex­pect­ing to plough in an­other few bil­lion dol­lars to make the tech­nol­ogy work: “It’s go­ing to take years to re­alise those re­turns. But if Ama­zon sees this through... the up­side is huge.”

Zoox could also dove­tail with Ama­zon’s “very se­cre­tive” robotics di­vi­sion, which started with its ac­qui­si­tion of Kiva Sys­tems in 2012.

Last year, Ama­zon had 200,000 Kiva ro­bots work­ing in its ware­houses; to­mor­row, could it com­bine shor­trange de­liv­ery bots with au­ton­o­mous vans to create a fully au­to­mated lux­ury postal ser­vice?

How much was Be­zos in­flu­enced by com­pe­ti­tion from Tesla into mak­ing this deal? The likely an­swer is not a lot.

There are few signs that Be­zos feels at all threat­ened by Musk, though Musk seems to en­joy goad­ing him on Twit­ter.

Jain points out that Ama­zon and Tesla have barely over­lapped be­fore now: “There is lit­er­ally no com­pe­ti­tion be­tween the two com­pa­nies. I don’t even think there has been a case of Ama­zon try­ing to poach Tesla em­ploy­ees.”

That did not stop Musk from es­ca­lat­ing the scrap last month af­ter Ama­zon’s Kin­dle di­vi­sion re­fused to pub­lish a book by an American jour­nal­ist cast­ing doubt on the threat of coro­n­avirus.

“This is in­sane @Jef­fBe­zos,” Musk tweeted. “Time to break up Ama­zon. Mo­nop­o­lies are wrong!” Ama­zon later said the re­fusal had been in er­ror.

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