A previous article discussed the possibility of Amazon (Nasdaq: AMZN) buying Zoox, a self-driving car startup. The deal was finalized on Friday with Amazon paying $1.2 billion which is down from its $3 billion valuation in 2018.
Amazon, famously, makes very few purchases, as it tends to develop products in-house. It's Amazon's first, major purchase since Whole Foods in 2017. The acquisitions it does make tend to be strategic and accretive. The current expectation is that Zoox's technology can be implemented in its warehouses and for delivery, down the line.
Amazon has already experimented with self-driving trucks to deliver cargo and at an employee meeting, it was reported that he said it's his latest intellectual interest. Its venture-arm made two investments in self-driving companies, Rivian and Aurora, in 2019. Its purchase of Zoox will help the companies logistics and delivery efforts while giving it an entry into a potential, trillion-dollar market in terms of making self-driving technology commercially available and viable.
It's expected that Zoox will operate autonomously within Amazon. The company has struggled in recent years with management turnover and legal issues with Tesla (Nasdaq: TSLA) over trade secrets. It's also experienced delays in bringing its product to market like other competitors including Uber (Nasdaq: UBER) and Google (Nasdaq: GOOG). Zoox needed to sell itself or do more dilutive, fundraising at a lower valuation given its high cash burn.
Tensions with Tesla
Already, Elon Musk and Jeff Bezos have a contentious relationship. Both have been wildly successful, but they have wildly different personalities. Following the news, Musk tweeted that Bezos is a "copy cat". And there's some truth in the charge as Bezos did launch his space company after Musk and both are in competition to take people to space and go to Mars. Now, they will be competing in the self-driving space. Before this, it seemed that Tesla was the clear leader with Zoox a distance second.
Tesla cars already have a primitive version of "autonomous driving mode" which is already on the road and giving the company valuable feedback to continuously improve its product. However, Zoox with Amazon's resources is going to become a much more, serious adversary. Self-driving like many technology products will likely become a winner-take-all market. The company with the most market share will have the most data that ensures it can keep iterating its product for better and safer outcomes.