Amazon looks to buy autonomous car company Zoox

28 May 2020

Amazon is reportedly in advanced talks to buy the self-driving technology company Zoox. This would be the online giant’s first purchase of an autonomous start-up according to the Financial Times.

Zoox has reportedly seen interest from a few buyers. The company told the Wall Street Journal that it ′has been receiving interest in a strategic transaction from multiple parties and has been working with Qatalyst Partners to evaluate such interest.’ The WSJ has calculated that if the acquisition by Amazon were to go ahead, the value of the start-up business would be below the $3.2 billion valuation is gained after a financing round in 2018 when it secured funding of $500 million.

Expensive developments

Founded in 2014, the Californian tech company is developing driverless technology, a ride-hailing network and a bespoke autonomous vehicle at scale. On their own, each of these systems represents an expensive investment. The start-up utilises a fleet of modified Toyota Highlander SUVs to test and develop its technology around the streets of San Francisco and Las Vegas. But Zoox has also been building a fully autonomous vehicle without the need for a steering wheel or pedals. 

Founder of Lux Capital, Josh Wolfe, who has taken part in several funding rounds for the firm, revealed that Zoox would need another $1 billion over the next two years to keep going. But with coronavirus (COVID-19) impacting every corner of the automotive world, Zoox too saw its fleet grounded, forcing it to make roughly 100 employees redundant, some 10% of its workforce.

Other self-driving developers have large automotive companies backing them financially. Cruise is supported by General Motors and Argo AI is backed by Ford and Volkswagen. Meanwhile, Zoox is currently operating without the support of a large automotive body.

An automotive Amazon?

While other businesses are being hard hit by COVID-19, Amazon is continuing to see success. At the end of last month, the e-commerce company announced its Q1 2020 revenues reached $75.4 billion, which works out at over $33 million an hour. More than capable of investing, Amazon is extending its reach into the automotive world. Last year it invested in Aurora, another autonomous-vehicle company, as well as electric vehicle start-up Rivian.

It appears that only the largest firms with the deepest pockets are currently investing in the more ambitious and therefore expensive automotive projects. This is happening at a time when self-driving projects are meeting significant barriers. Audi recently announced it is withdrawing plans to feature level 3 autonomous systems in the next A8. This was reportedly due to a lacking legal framework making homologation of such technology in a series-production car too difficult. So trying to develop already costly technologies alongside navigating these issues requires significant cash reserves that few can boast.

Next to Amazon, Google is also benefiting from increased funding for its self-driving arm, Waymo. This month, the division raised an additional $750 million in its first external investment round, bringing its total funding to $3 billion. Founded 11 years ago as a project within Google, Waymo is considered to be one of the top developers of self-driving technology. So autonomous technology looks to rely on a handful of companies, that are capable of keeping the dream alive.