Morgan Stanley analyst Brian Nowak floated that idea in response to a Wall Street Journal report last night that said Amazon (ticker: AMZN) is in “advanced talks:” to acquire Zoox, a company working on autonomous vehicles. The Journal story said a deal would be at a valuation below the last Zoox investment round, which came at $3.2 billion in 2018. Zoox has raised $955 million since its founding in 2014, according to Crunchbase. The story notes that Zoox is working on hardware and software that could be used to create electric-powered robot taxis that could be ordered up by smartphone.
Asked about the Journal story, both Amazon and Zoox declined to comment.
In a research note in response to the Journal story, Nowak lays out four reasons he thinks Amazon should invest in autonomous driving.
One, he says it could lead to a more-efficient delivery network. “In our view, the value of cost-effective shipping is likely to only rise given the inflection we are seeing in e-commerce in 2020,” he writes.
Two, on a related note, he writes that there are material potential long-term savings, as shipping remains one of the company’s largest expense challenges. He notes that 2019 shipping costs were 12% of gross merchandise value, and expected to reach $90 billion by 2023. He thinks an effective autonomous delivery network eventually could save the company more than $20 billion in recurring shipping costs.
Three, also related to the other two, he thinks autonomous technology is a natural extension of the company’s plans to build a third-party logistics network in competition with
United Parcel Service
and the U.S. Postal Service—he sees a multibillion-dollar opportunity at play.
Not least, he asserts that Amazon’s “innovation focus, capital to invest, and leading shipping volumes (and the miles driven along with them) make it one of the few companies that could build a product to compete with [
(GOOGL) unit] Waymo, Uber, Lyft and others” in autonomous driving.
And here’s the kicker: “Over time, this acquisition would also open the door for Amazon to potentially begin to compete in the ride sharing and food-delivery industries,” he writes.
Nowak theorizes that Amazon could offer discount ride-sharing to Prime members—a move he thinks would be “a meaningful driver of Prime growth, retention and pricing power.” He sees ride-sharing as a $60 billion bookings opportunity in the U.S. alone by 2023.
Uber and Lyft didn’t immediately respond to requests for comment.
And by the way, the car-sharing services are not the only companies that could be threatened by an Amazon dive into autonomous driving, in Nowak’s view.
“If confirmed, we see this as further evidence that the ‘teracap’ platforms [companies with market caps over $1 trillion] are a force to be reckoned with in the [autonomous-vehicle] race,” he writes. “In a post-Covid world, we believe fewer and more powerful players will be in position to deploy capital and talent to solving autonomy with a ‘play to win’ mindset. We see Amazon (and other tech players) as clear competitors, not partners, versus the likes of
General Motors (GM).
And he says UPS and FedEx “will have to respond to keep up” with the cost advantages and “ESG benefits” of autonomous delivery by electric powered autonomous vehicles.
Amazon stock is down 1.6% to $2,383.20 in Wednesday trading. Both Uber and Lyft are down fractionally.
Write to Eric J. Savitz at firstname.lastname@example.org