Online retail giant Amazon has just reached an agreement to purchase autonomous vehicle startup Zoox for around $1.2 billion. The massive investment is part of Amazon's latest efforts to integrate self-driving technologies into its logistics business.
The acquisition is the company's first entry into the rapidly growing segment and comes just months after it made strategic investments in self-driving startups Rivian Automotive and Aurora Innovation. Industry experts have questioned the rationale behind the acquisition, with some speculating that Amazon may very well produce its own brand of electric autonomous vehicles.
However, other analysts predict that Amazon may be interested in building its own fleet of autonomous driving vehicles to meet last-mile deliveries. By building its own vehicles, Amazon can drastically reduce costs by cutting the middle man and eliminating the need for human labor.
Zoox, which was founded in 2014 and headquartered in California, mainly creates autonomous vehicle systems aimed at the Robo-taxi segment. Unlike other autonomous driving startups, Zoox is focusing on building customized systems for fully autonomous driving models as opposed to retrofitting existing platforms. The company currently has a contract to implement its self-driving system on Toyota's Highlander mid-size sports utility vehicle (SUV).
Amazon is also known for making substantial investments in future technologies that are likely to be globally adopted. Fully autonomous vehicles, specifically level 5 autonomous driving, are expected to be globally adopted over the next decade. Through its immense capital, Amazon is in the position to make large bets on technologies that it thinks will become profitable in the long-term.
Apart from profiting from its investments, Amazon can also take advantage of the acquisition to enhance its own fleet and logistics operations. It makes perfect sense for the company to build its own vehicles rather than buy them from a third-party manufacturer.
Over the last decade, Amazon had invested heavily in warehouse automation technologies. In 2012, the company acquired Kiva Systems, a Massachusetts-based robotics company that manufactured automated robotic fulfillment systems. That acquisition, which eventually led to the establishment of Amazon Robotics, had substantially paid off and resulting in a dramatic growth in the company's business.
Amazon's acquisition of Zoox is expected to do much of the same as its earlier purchase of Kiva. Amazon is hoping that is investment will have the same impact on its autonomous delivery operations as it focuses on optimizing its on-road transportation network. Through the combination of its enhanced micro fulfillment center distribution model and on-road delivery network, Amazon can better meet consumer demand and increase its profit margins.