Why did Amazon just buy autonomous driving start-up Zoox?

Confirming months of rumors, Amazon confirmed Friday that it is acquiring the San Francisco-based autonomous vehicle start-up Zoox.

Although details of the deal weren’t released, the Financial Times reported Amazon will spend $1.2 billion for Zoox, making it one of the biggest acquisitions ever for the tech and online retail giant. But it is a significant comedown for the start-up which, as recently as 2018, was valued at just over $3 billion.

The six-year-old Zoox has been considered one of the leaders in the development of self-driving vehicle technology, though it has been plagued by a variety of problems over the last couple years, including a rapid turnover in management. It had been openly seeking a buyer in recent months.

“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,” Jeff Wilke, Amazon’s CEO of global consumer, said in a statement.

Exactly what Amazon has in mind for its new acquisition isn’t clear. Speculation has included the use of Zoox software to help manage the rapidly growing fleet of delivery vehicles Amazon operates, replacing contracts with UPS, the USPS and other outside providers.

“This acquisition solidifies Zoox’s impact on the autonomous driving industry,” said the start-up’s CEO Aicha Evans. “We have made great strides with our purpose-built approach to safe, autonomous mobility, and our exceptionally talented team working every day to realize that vision. We now have an even greater opportunity to realize a fully autonomous future.”

If Zoox can, indeed, realize that goal, Amazon would be likely to use its self-driving technology in the all-electric delivery vans being developed for the retailer by Rivian. Amazon led a consortium that invested $700 million in the Detroit start-up last year and it hopes to begin taking delivery of the first of those BEVs in 2021. Rivian expects to produce 100,000 of them for Amazon by 2024.

Much has changed since Zoox was founded in July 2014. Back then, it was widely expected that the first autonomous vehicles to market would be passenger cars, perhaps entering production by as early as 2020.

So far, the technology has not reached near that level of sophistication. Systems such as the Tesla Autopilot and General Motors Super Cruise are generally limited in terms of the roads they can operate on and require drivers to remain ready to retake control at a moment’s notice.

Ride-sharing services such as Uber, Lyft and Waymo still hope to use autonomous technology to allow them to eliminate human drivers and cut costs, but it is now widely expected that the necessary software won’t be ready until late in the decade. And, even then, it is not clear what sort of market there will be. Studies by IBM, Capgemini and others have found a sharp decline in consumer interest in using mass transit and ride-hailing services due to pandemic-fueled health concerns.

During a media webinar this week, John Murphy, the senior automotive analyst at Bank of America, said that even as the timetable for full autonomy is being pushed “further and further” back, the technology is likely to find its initial application “for commercial vans.”

And that appears to make it a match for the vast delivery network Amazon is putting together.

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