When the Fed bailed out the stock market in March of 2020, it might as well have given the most valuable tech companies billions of dollars. Regardless, they are using the free liquidity to boost themselves to acquire companies to become even more dominant. We’re soaring into a period of forced consolidation, from food delivery to the future of the smart car.
Got to admit, Amazon is sitting pretty at a $1.5 Trillion market cap, with a stock that has hit $3,057 today. So let’s break this down.
Amazon is getting into the future of logistics and transportation, both EV and autonomous. Amazon had previously invested $700 million in Rivian, a Michigan company that is developing a battery-powered pickup truck and an electric sport utility vehicle. Then they ordered a fleet of 100,000 of these electric vans.
Amazon recently acquired Zoox for $1.2 Billion. The WSJ had reported in May that this was in the works and the story was first broken by the Financial Times and The Information.
Zoox is working to imagine, invent, and design a world-class autonomous ride-hailing experience. We know eventually Amazon will likely have the dominant self-driving trucks and disrupt logistics as a whole. Its spending $billions in last-mile fulfillment and won’t stop until it innovates considerably in the future of transportation for its core E-commerce and grocery delivery business.
According to Amazon’s press release, Zoox’s C-suite executives will remain in place and it will continue to operate as a “standalone business.” Axios brings up an important point. While Apple, Google and others have invested in self-driving technology, Amazon is the one whose core business could benefit the most, given how much the company spends to deliver goods to consumers.
Meanwhile Google keeps working with China on this. Waymo, a unit of Silicon Valley’s Alphabet Inc., said it will be the exclusive global partner for Volvo Cars for developing self-driving vehicles capable of operating safely without routine driver intervention. Waymo will focus on the artificial intelligence for the software “driver.” Volvo will design and manufacture the vehicles. If you didn’t know, Volvo is owned by China’s Zhejiang Geely Holding Group Co.
Zoox was valued in the area of $3 Billion, after raising $955 million. Amazon bought this on discount thanks to the irrational stock market bailed out by the Fed. It’s akin to Jerome Powell giving Jeff Bezos a company for free. Amazon’s stock price is $2,890. In March, 2020 it had reached a low of $1,676. Capitalism is not really working properly these days.
In April, Zoox had to lay off 120 people. The virus forced the company to shut down a planned pilot for its ride-sharing service. The pandemic brought consolidation in the future of autonomous vehicles (Paywall) to the detriment of many startups.
Microsoft, Tesla, Apple, Amazon and Google can basically afford to do a lot of things during the pandemic. M&A in antitrust proportions are possible with startups, talent, retail companies — all at a steep discount. In the 2nd half of 2020, we are starting to see more activity.
But why is it a big deal for Amazon’s future? Morgan Stanley analysts said in May that driverless delivery would save Amazon more than $20 billion each year. With Waymo One and Tesla expected to be big players in the space, don’t count out Amazon.
Amazon isn’t just into Rivian and Zoox though. Amazon is using self-driving trucks developed by Embark to haul some cargo on the I-10 interstate highway. Embark integrates its self-driving systems into Peterbilt semis, rather than building its own vehicles completely from scratch. Embark also has fellow startup kin like Ike, Thor Trucks and Pronto.ai, among others.
Zoox planned from the beginning to develop the technology, build a car and operate a robotaxi service. That kind of ambition must have appealed to Amazon. It’s unclear what exactly Amazon wants to do with Zoox’s technology — use parts of its technology to apply to warehouse robots, delivery vehicles and other needs, or keep its whole project going.
It’s a large deal for Amazon, which acquired Whole Foods for $13.7 billion in 2017 but has otherwise generally made acquisitions of less than $1 billion. The purchase of Zoox is certain to attract scrutiny from lawmakers and criticism from rivals, but when you can acquire companies, their patents and talents for discounts like this, you’d be crazy not to if it syncs with your long term vision as a company.
Waymo, Aurora and others have developed automated driving systems that they integrated into vehicles made by established automakers. The future of the smart EV car is quite a story for the 2020s and humanity, and you know Amazon will be involved in that story.
Zoox launched in 2014 with the vision of purpose-built, zero-emissions vehicles designed for autonomous ride-hailing, along with an end-to-end autonomy software stack. The year is 2020, and BigTech is going on a buying spree as U.S. startups disappear into the mists of the pandemic. This greed-is-good, winner-takes-all capitalism is just getting started, folks.