Autonomous Autos – Gadzoox!.

Zoox is all about the automation of distribution.

• I am far from convinced that Amazon has decided to enter the autonomous driving game but instead is likely to use Zoox to automate the last mile of its distribution network and make a vast cost saving.
• Amazon has been in talks to acquire Zoox for some time but The Information (see here) is claiming that the sale has been agreed at somewhere slightly above $1bn and will be announced later today (Friday 26^th June 2020).
• Zoox is slightly different from most of its peers in that it is focusing purely on fleets of vehicles for the mass movement of passengers and goods where there is no driver and no controls.
• It is not working on providing software for private vehicles but instead intends to offer a complete hardware and software solution for autonomy.
• This means that it will compete with robotaxi offerings from Waymo, Cruise, Uber and Mobileye rather than the other companies who plan to offer autonomous solutions for everyday vehicles.
• This is what makes Zoox a good fit for Amazon as it is purchasing an asset that can increase the degree of automation in its distribution which it has already done several times in the past.
• Furthermore, I think that Zoox has one of the better autonomous driving offerings but is currently suffering from its inability to forecast market readiness and demand for its product.
• Zoox last raised $500m in 2018 at a valuation of $3.2bn bringing the total raised to $800m.
• At that time it was widely thought that autonomous driving would take off around 2020 (RFM was at the time and still is today forecasting 2028 see here).
• This meant that business plans assumed that revenues would begin to take off in 2020 and spending plans were based on that premise.
• The problem is that there is still no sign of revenues and so the money is beginning to run out and given that the hype bubble has been well and truly popped, raising more is proving to be difficult.
• This is why Amazon is likely to get the company for 65% less than the previous investors paid in 2018 as its owners have no other viable choice.
• Hence, I think that this is an excellent move by Amazon as it is acquiring a pretty decent asset at a price which it should be able to earn a huge return on.
• This return will not be felt for many years but when it does it will be saving Amazon multiple billions in costs every year.
• Furthermore, Amazon will have full vertical control of the technical development and it can ensure that it is fully integrated with all of its other systems thereby optimising its performance.
• This would be much more difficult with a 3^rd party offering or a partner.
• This is yet another sign of the consolidation that is beginning to sweep this corner of the technology sector and with revenues so far out, it looks likely that only the players with big backers are going to survive.
• I still think that OEMs have no need to rush into this sector as by the time they need it, there will be a good range of off the shelf solutions available for them to choose from.
• The consolidation is just getting started and the overall value of this segment is going to continue trending lower (see here).