BIG BEEF OVER NOTHING IN BILLIONAIRE BUSHWHACKER ALLEY

Electric-car mogul Elon Musk needn’t lose his wig over Amazon’s Jezz Bezos buying a self-driving car start-up, write Olivia Rudgard and Laurence Dodds

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 (about R1,660,000) a 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, which simmers to this day, helps explain why Musk responded to Bezos’s $1.2bn takeover of the selfdriving 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 particularly 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,” says Sam Abuelsamid, analyst at Guidehouse Insights. “They have a good team and they’ve developed a good system.”

Even with that solid reputation, he says: “Zoox was in a position where they needed to find a buyer.” The deal, and the lowerthan-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 eyewateringly 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 recent 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 for his business.

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 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, as other players, such as Uber and Alphabet’s Waymo, aim to do.

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 robotaxi market, the short-term utility is likely in logistics. “I suspect 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 preplanned, predictable routes, something which is more realistic with current autonomous technology.

Sanchit Jain, an ecommerce specialist, 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 don’t need to worry about a driver being tired.”

That strategy 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,” he says. “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 short-range delivery bots with autonomous vans to create a fully automated postal service?

So 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 threatened by Musk, though Musk seems to enjoy goading him on Twitter, his communication platform of choice.

Jain points out that Amazon and Tesla have barely overlapped before now. “There’s no competition between the companies.”

That didn’t 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.