Amazon Interest In Zoox Seen Opening Door For Potential Uber, Tesla Competition

Amazon (AMZN) is said to be in advanced talks to acquire self-driving car technology company Zoox, according to a report by The Wall Street Journal. Commenting on the news, Morgan Stanley analyst Brian Nowak argued that this could mean more efficient in-house and third-party logistics for Amazon, as well as cost savings, along with an eventual entry into ridesharing. A Zoox acquisition could lead to long-term competition for Alphabet's (GOOGL) Waymo, Uber (UBER), Lyft (LYFT) and Tesla (TSLA), along with giving Amazon autonomous middle-mile and last-mile capability to compete with UPS (UPS) and FedEx (FDX), Nowak added.

AMAZON IN TALKS TO BUY ZOOX: Amazon is in advanced talks to acquire self-driving car technology company Zoox, The Wall Street Journal’s Cara Lombardo and Tim Higgins reported, citing people familiar with the matter. The deal would value Zoox at less than the $3.2B it achieved in a funding round in 2018, sources said. Zoox, founded in 2014, has been working to develop the hardware and software needed to create electric-powered, robot taxis that would be summoned by smartphone app starting this year, the authors added.

RIDESHARING COMPETITION: After The Wall Street Journal reported that Amazon is in advanced talks to buy Zoox, Morgan Stanley analyst Brian Nowak told investors that such a deal could lead to more efficient in-house and third-party logistics and an eventual entry into ridesharing for Amazon. This could lead to long-term competition for Alphabet's Waymo, Uber, Lyft, and Tesla, along with giving Amazon autonomous middle-mile and last-mile capability to compete with UPS and FedEx, Nowak added.

From an e-commerce perspective, the analyst believes it could lead to a potentially even more efficient long-term delivery network to compete harder against traditional retailers and other online players. The value of cost-effective shipping is likely to only rise given the inflection in e-commerce in 2020 and Amazon's own push toward one-day shipping, he added. Further, Nowak sees the potential long-term savings as material as he views shipping as one of Amazon's largest expense challenges to manage over the next decade. His math shows how an autonomous offering could save Amazon $20B-plus of annual recurring shipping savings.

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