Weekly Brief: Amazon’s Dive into Driverless is About Survival

Commentary by Andrew Tolve

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21st December 2020

Amazon’s self-driving car start-up Zoox unveiled its first robo-taxi last week.

The vehicle calls to mind a shiny toaster on wheels and features four seats inside. The passengers face each other as they would in a horse-drawn carriage. Only this carriage can travel up to 75mph, requires no driver and has bi-directional steering.

This means that each of its wheels can steer independently and thus change the vehicle’s direction without reversing. The robo-taxi has no steering wheel and is all-electric. Zoox says it can drive for 16 hours on a single charge.

The timing couldn’t be more symbolic. Zoox’s debut came within days of Uber selling its Advanced Technologies Group to self-driving car start-up Aurora (of which Amazon is a part owner). The move signaled that Uber has given up on its quest to become the robo-taxi company of the future – one capable of developing its own autonomous vehicles and deploying them across a vast ride-hailing network. Into that void now steps Amazon.

Its CEO Jeff Bezos has made no secret of his desire to be the company of everything. Uber CEO Dara Khosrowshahi famously said that his company aspires to be the “Amazon for transportation.” Omnipresent, efficient, highly profitably and automated. With the turn of events in the past two weeks, it looks as if Amazon is primed to take over that role, not Uber.

Not only does the company have deep pockets and quarterly profits to fund a moon-shot like Zoox, it also has an international network of built-in customers which it can incentivize to use its robo-taxi network once it is up and running. Imagine if the 100 million Amazon Prime customers around the world all get discounted taxi rides. That’s a powerful motivation to pull users away from any fledgling robo-taxi network operated by Uber, Lyft, Waymo or General Motors’ Cruise.

It’s important not to blow things out of proportion here. Zoox’s debut is its first ever. No public passengers have traveled in it yet and the start-up isn’t planning to debut it on public streets anytime soon. For now, it’s a new autonomous vehicle taking baby steps on private roads. Neither Amazon nor Zoox has revealed a timetable for future deployments.

That being said, Amazon is a company built on breakneck speed and its CEO has a penchant for pushing new models into existence faster than rivals would deem possible. It is doubly motivated in this case because developing self-driving technology can help it eliminate one of the single largest expenses of its e-commerce business. The company spends tens of billions each year paying the US Postal Service, FedEX and DHL Express to deliver its packages. Its annual shipping costs are projected to hit $75Bn by 2022; yet if it can integrate Zoox’s autonomous tech, or that of Aurora, into its own fleet of trucks and delivery vans, it could decrease that cost by roughly 50%, according to its own projections.

It is also motivated by the potential threat that Waymo poses to its e-commerce business. The company believes that Waymo’s self-driving vehicles could partner with local brick and mortar businesses (as they have already done with the likes of Walmart) and help them rapidly deliver products to customers, thus negating the need for Amazon. Waymo also could integrate with Google Shopping and offer its own incentives across the two markets of ride-hailing and e-commerce. Hence the reason Bezos is dead set on investing in autonomous technology. His vision of a future powered by drones and autonomous vehicles isn’t just about growth for his company, it’s about existential survival.