Amazon is expected to announce a deal to buy self-driving technology startup Zoox for over $1 billion, according to a report by The Information. This does not come as a surprise, considering Amazon’s closed doors discussion with Zoox over the last month.
With a current valuation expected to hover over the $1 billion mark, Zoox has had a considerable fall in fortunes from the $3.2 billion it was last valued at when it raised funding in 2018.
California-based Zoox was founded in 2014 to create a fusion robo-taxi that is both electrified and autonomously driven. In that regard, the company initially looked to retrofit existing vehicles to make them autonomous, rather than building a vehicle from scratch.
However, Zoox soon realized that its goal to create software and hardware needed to run a fleet of robo-taxis was limited to its financing scope. With autonomous vehicle companies feeling the pinch in raising funds, Zoox had to contend with falling cash reserves and possible capitulation – as in the case of another autonomous trucking startup, Starsky Robotics.
Many observers thought Amazon’s advent into autonomous driving was inevitable. One of the largest ecommerce companies in the world, Amazon’s operations are massive and widely dispersed. With logistics costs being its single largest operational expense, Amazon has tirelessly looked to improve efficiency across its supply chain – predominantly by digitalization and automation.
Zoox’s fundamental issue has been biting off more than it could chew. Vehicle electrification, autonomous driving, and on-demand cab-hailing are all individual segments that have companies battling for market space. For a startup hamstrung by depleting finances, Zoox found it hard to compete in all these segments simultaneously.
The investment ecosystem for autonomous vehicles has seen a noticeable tilt in financing trends. Investors now flock to pour money into already established self-driving companies like Alphabet’s Waymo and GM’s Cruise, leaving early- and mid-stage startups high and dry.
Amazon’s interest in Zoox follows its stake in another self-driving firm – Aurora Innovation, which saw Amazon participating in its $530 million fundraise in 2019. Amazon followed this with a massive order of 100,000 delivery vans from electric car manufacturer Rivian. The deliveries would be done in phases, with all vehicles being delivered by 2030.
Zoox’s CEO Alcha Evans announced in February that 2020 would be a “huge year” for the startup, as Zoox readies itself to show the world its technology. She also mentioned that the company expects to launch its bi-directional electric robo-taxi that comes with four-wheel steering and active suspension. Zoox had claimed that it would start early commercial pilots by 2021.
However, it remains to be seen how Amazon will steer the company post-acquisition. For Amazon, a company that has dominated ecommerce for over two decades, Zoox could be a possibility to venture into the on-demand cab-hailing segment. This would put Amazon on the mobility map, further pressuring incumbents like Uber and Lyft, which are still struggling to break even.
***
More from Vishnu Rajamanickam
Amazon is serious about self-driving technology, eyeing multibillion-dollar acquisition
Another fundraise, as self-driving startup Waymo’s investment hits $3 billion in 2020
Will COVID-19 accelerate the adoption of autonomous vehicles?