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Tech Giant Buying a Self-Driving Tech Start-Up...Will It Pay Off?

Thursday, September 15, 2022

While Cruise, Argo AI and Waymo all have deals to deliver groceries and other goods, self-driving tech company Zoox envisions carrying passengers despite being a subsidiary of Amazon.

Zoox, a self-driving tech company owned by e-commerce giant Amazon, is focused on moving people around cities. According to co-founder Jesse Levinson, package delivery is “not in the immediate roadmap”. Zoox’s technology would work for automated delivery, but ride-hailing offers a faster return on investment. “People pay more to move themselves around cities than to move packages,” Levinson said.

Zoox is one of two major autonomous vehicle companies building its own robotaxi.  It will drive itself without human intervention and it won’t have controls like a steering wheel, accelerator, or brake pedal. Since the Zoox vehicle is bi-directional and has four-wheel steering, it’s highly manoeuvrable in dense urban environments. It also has multiple in-vehicle airbags and a top speed of 75 mph in either direction, which makes it suitable for highway use.

Despite its ambitions, analysts agree that Zoox will alter its strategy. For example, Sam Abuelsamid, a mobility analyst at Guidehouse Insights said that a reason why everyone else is doing deliveries is that from an operational and unit-economics perspective, deliveries can be much more economically viable. Moreover, he pointed out that package delivery has more flexibility in the sense that people expect a robotaxi to take the shortest, quickest route to the destination, while a service that delivers packages can optimize for efficiency rather than speed. “They’re definitely going after both ride-hailing and delivery,” said Gary Silberg, who heads the automotive practice at the KPMG consulting firm. And probably the most important reason is that Amazon’s true focus lies in logistics and not in ride-hailing.

If Zoox is eventually repurposed towards things instead of people, they can easily modify the vehicle. “Just take the passenger seats out and replace them with an Amazon locker on wheels,” Abuelsamid said. Amazon has also invested in Aurora Innovation, an AV developer first focused on deploying autonomous trucks in highway environments. At some point, Zoox and Aurora could complement each other to Amazon’s advantage.

Personal Comment:

That Zoox is looking for a successful business model is no surprise. The autonomous driving market has been shifting quickly. Just last year a number of ride-hailing companies have sold off their ride-hailing divisions, Uber to Aurora and Lyft to Toyota. Tech giants such as Microsoft (invested $2 billion in Cruise), Alphabet (continues to own Waymo), and now Amazon are spending on autonomous driving.

In 2019 a report had placed E-hailing as the most interesting area of development for the mobility industry. That, of course, was pre Covid and other macro financial ills such as inflation and so on that we see today. All of this has obviously affected the industry of e-hailing and even carpooling, as was mentioned in the newsletter last week. The current top areas of investment are electrical vehicles and charging, battery tech, autonomous vehicles, and subscription services. The mobility industry has seen significant investment over the last 10 years, but it is clear that things are still dynamic and searching for successful business models and the tech to power them. The many partnerships and mergers also raise the potential that there can be conflicting goals. It might, for example, be the case that Zoox’s aim of carrying people will be at odds with Amazon’s need for logistics. Then again, it might be a platform that hits the sweet spot of being able to do both!

Written by Kateryna Melnyk,
RISE Mobility & Systems