REUTERS/Gary Cameron
- Amazon announced it's buying self-driving startup Zoox on Friday.
- Analysts say the deal can help Amazon in many ways by expanding its delivery capacity and cost efficiency.
- Amazon declined to share the exact deal size, but reports indicate it's over $1 billion.
- Visit Business Insider's homepage for more stories.
Amazon announced the acquisition of self-driving startup Zoox on Friday, signaling its first big foray into the autonomous vehicle space.
The deal is expected to be worth over $1 billion, according to The Information. Amazon declined to share the financial terms.
In a blog post announcing the deal, Amazon shared few details for how it plans to use Zoox's technology. Zoox's current leadership team, including CEO Aicha Evans and CTO Jesse Levinson, will continue to run the company as a standalone business, Amazon said.
"Zoox is working to imagine, invent, and design a world-class autonomous ride-hailing experience," Jeff Wilke, Amazon's CEO of Worldwide Consumer, said in a statement. "Like Amazon, Zoox is passionate about innovation and about its customers, and we're excited to help the talented Zoox team to bring their vision to reality in the years ahead."
Analysts say the Zoox acquisition gives a good look into Amazon's thinking over a number of different areas, including its delivery expansion and future M&A strategy.
Here are 5 main takeaways from Amazon's Zoox acquisition:
It's a 'stepping stone' toward expanding Amazon's delivery network and capacityAmazon's delivery network is likely the biggest beneficiary of this deal, according to Loup Ventures managing partner Andrew Murphy. It's no secret Amazon wants to automate more parts of its logistics operations, and Zoox's self-driving technology can help by ultimately eliminating the need for human drivers.
"Amazon has made it clear that they don't want to rely on third parties for delivery, and this is a logical progression of their efforts in the space," Murphy said.
Anthony Chukumba, an analyst at Loop Capital, told Business Insider that the Zoox acquisition is a "stepping stone" toward eventually offering free same-day delivery to all Prime members. While the technology and regulatory issues remain for a wider deployment of self-driving delivery cars, he said Zoox's underlying technology will help Amazon significantly expand its delivery capacity and cost efficiency.
"Amazon needs more final mile delivery capacity," he said.
It can save billions of dollars for AmazonIn a note published on Friday, RW Baird analyst Colin Sebastian wrote that the $1 billion price tag is a bargain for Amazon as Zoox's team could help save "many years of R&D" and "many billions of dollars" in logistics costs.
Zoox's experience in advanced hardware engineering, electric battery technology, and other automation software can help Amazon move 2 to 3 years ahead in the autonomous vehicle space, Sebastian wrote. He also said the Amazon-Zoox combination can help serve as a "counterbalance" to the growing market share of Uber and Alphabet's Waymo.
Morgan Stanley's Brian Nowak wrote in a note published late last month that a Zoox acquisition could potentially help save more than $20 billion per year shipping costs, saying it is be a "natural extension" of Amazon's efforts to build its own third-party logistics network.
It's a sign of bigger deals to comeAt over $1 billion, Zoox is the second-largest acquisition in Amazon's history, following the $13.7 billion deal for Whole Foods in 2017.
But Tom Forte, an analyst at DA Davidson, said deals of this size could become the norm for Amazon going forward. Amazon is a much larger company today than it has ever been, with a market cap well over $1 trillion, and it only makes sense to do larger deals if it wants to the acquisition to make a meaningful impact on its business.
"It takes more to move the needle for the company than it ever has in the past," Forte said.
RW Baird's Sebastian wrote in his report that it's worth noting Amazon's strong track-record with M&A. Amazon has historically allowed acquired companies to run independently, while only partnering in areas that can help both ways. Twitch, Ring, Zappos, Kiva, and Whole Foods are all good examples of that approach, although some acquisitions, like the Chinese online retailer Joyo.com, proved to be a dud.
It shows Amazon's ambitions in the auto industry and other markets, like ride-sharing and food-deliveryThe Zoox acquisition reaffirms Amazon CEO Jeff Bezos's growing interest in the general auto industry. Bezos previously told employees that he's "very excited" about the auto industry because of all the innovation taking place, adding that it's a space he's willing to "participate in." The Zoox acquisition follows Amazon's investments in other auto-related startups in recent years, including self-driving startup Aurora and the electric vehicle maker Rivian.
Nowak at Morgan Stanley wrote in his report that in the long term, Zoox's acquisition could open the door for Amazon to potentially get into the ride-sharing and food delivery markets as well. For example, discounted ridesharing service for Prime members could be a meaningful driver of growth for Prime subscribers, he said.
It helps improve Amazon's energy efficiency and leadership diversityAlthough the Zoox acquisition is mainly aimed at improving Amazon's delivery capacity, it can have side benefits of improving the company's energy efficiency and leadership diversity, according to Loop Capital's Chukumba.
Part of Zoox's vision is to build zero-emission vehicles, which is in line with Amazon's commitment to be carbon-neutral by 2040. On Thursday, Amazon also announced that it's renaming Seattle's KeyArena to the Climate Pledge Arena, inspired by the Climate Pledge initiative it co-founded last year.
On top of that, the fact that Zoox's CEO Aicha Evans is a Black woman can help add the much needed diversity to Amazon, which is known for having very few women or people of color in its upper ranks.
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