Autonomous Vehicle Startup Zoox May Be Driving A Deal With Amazon

• by Thom Forbes , Featured Columnist @tforbes, May 27, 2020

Amazon is said to be in advanced negotiations to buy Zoox, the Foster City, California-based autonomous vehicle startup that has had a bumpy ride since being valued at $3.2 billion in 2018 and then ousting its charismatic co-founder more than a year ago.

“Cofounded by Australian artist and designer Tim Kentley-Klay and Stanford computer scientist Jesse Levinson in 2014, Zoox has sought to build a business of on-demand robotaxis and delivery vehicles that blend the most advanced aspects of autonomous driving tech with cutting-edge electric powertrains to serve customers in dense urban markets,” Alan Ohnsman writes  for Forbes. 

“Its purpose-built vehicle is designed for use in a company-branded fleet, not individual ownership, with a goal to begin operation late this year. Kentley-Klay was fired in 2018, shortly after the company announced a $500 million funding round, and was replaced as CEO in early 2019 by former Intel INTC executive Aicha Evans,” Ohnsman, who wrote an account of the startup’s “wild ride” in May 2018, continues.

“Kentley-Klay was initially extremely effective at winning over investors, using an air of mystery in the press and possessing a showman’s knack for stoking excitement. In October 2016, he talked obliquely of his vision for a ride experience like ‘Disneyland on the streets of … San Francisco,’” writeThe Wall Street Journal’s Cara Lombardo and Tim Higgins in breaking news of the talks yesterday.

“The challenge for Zoox was that Mr. Kentley-Klay had sold investors on the idea of a company built on three of the hottest trends in the automotive industry: driverless technology, electric vehicles and ride-hailing. Each leg of that stool was a major, costly challenge being pursued by much larger and better-funded competitors,” they add.

“Zoox’s prospects soured last month when the coronavirus crisis grounded its fleet and forced the company to lay off about 100 employees, representing 10% of its workforce,” Patrick McGee writes  for Financial Times.

“Before coronavirus hit, Zoox’s test fleet of modified Toyota Highlander sport utility vehicles were a common sight in San Francisco and Las Vegas. But the company has also developed a fully autonomous vehicle that lacks a steering wheel or pedals and features carriage-style seating. That vehicle has not been shown to the public but a service using it was scheduled to be launched in trial format this year before being deployed more widely in 2021,” McGee adds.

“Amazon is willing to spend heavily to automate its e-commerce business. The online retail giant purchased warehouse robot-maker Kiva Systems Inc. in 2012 for $775 million and now has tens of thousands of robots in warehouses around the world,” Bloomberg’s Katie Roof and Spencer Soper observe  for Yahoo Finance. 

"Paying drivers to deliver packages is still one of the biggest costs in the company’s operation, though. Chief executive officer Jeff Bezos announced plans for drone delivery in 2013, though they have yet to materialize at scale. 

“Last year, Amazon revealed an experimental delivery robot called Scout in the Seattle area that rolls on sidewalks like a shopping cart. Buying Zoox could help Amazon ‘manage rising shipping costs that we project will exceed $60 billion by 2025,’ Bloomberg Intelligence analysts Jitendra Waral and April Kim wrote in a research note on Tuesday,” Roof and Soper add.

“In 2019, Business Insider’s Mark Matousek took a test ride in one of [Zoox’s] self-driving vehicles, and described the experience as more comfortable than taking an Uber or a Lyft,” Shona Ghosh writes  for Business Insider.

More recently, Matousek “reported that self-driving car startups are going through a tough patch during the pandemic, noting that Zoox and other companies have had to lay off staff. It has become tougher for these capital-intensive, experimental startups to raise cash and it's likely several will be looking for buyers,” Ghosh adds.

“The [Wall Street] Journal cautioned that an agreement may be weeks away and the discussions could still fall apart. Earlier, The Informationreported  that Zoox was considering a sale while continuing to look for additional funding,” Joann Muller points out  for Axios.

“More likely, it will seek to blend Zoox's AV expertise with that of Aurora and Rivian, which it has tapped to deliver a fleet of 100,000 electric delivery trucks,” Muller adds.

Officially, “Zoox has been receiving interest in a strategic transaction from multiple parties and has been working with Qatalyst Partners to evaluate such interest,” it tells Bloomberg’s Roof and Soper. Amazon declined to comment.