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June 26, 2020 12:30 PM, EDT

Amazon Buys Driverless Startup Zoox, Cites Ride-Hailing Prowess

A Zoox self-driving car is operated outside the company's headquarters in California on May 27.A Zoox self-driving car is operated outside the company's headquarters in California on May 27. (Michael Short/Bloomberg News)

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Amazon.com Inc. is buying autonomous vehicle startup Zoox Inc., a move that could help the company create a formidable opponent to ride-hailing and food-delivery companies.

Terms were not announced in a statement June 26, but The Information reported earlier that Amazon would pay more than $1 billion. Zoox CEO Aicha Evans and co-founder and Chief Technology Officer Jesse Levinson will continue to lead the company as a stand-alone business.

“Zoox is working to imagine, invent and design a world-class autonomous ride-hailing experience,” said Jeff Wilke, the head of Amazon’s worldwide retail business.

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Some analysts also have suggested that Zoox could provide the technology for autonomous delivery vehicles and help Amazon slash shipping costs, one of the e-commerce giant’s biggest expenses. Morgan Stanley analysts have estimated such cost savings could amount to more than $20 billion annually.

Autonomous vehicles have been a target of Silicon Valley giants and venture capital investors for years, but technical and regulatory hurdles have made getting safe AVs on the road a longer slog than the boosters had hoped.

Still, bulking up in driverless technology extends Amazon’s efforts to build its own third-party logistics network. Last year, the company invested along with Silicon Valley venture firm Sequoia Capital in Aurora Innovation Inc., a self-driving startup led by the former heads of Google’s driverless car project and Tesla Inc.’s Autopilot team. Amazon also has backed Rivian Automotive Inc., the electric pickup and SUV maker.

Zoox, a 1,000-person startup based in Foster City, Calif., has been developing a prototype for driverless cars to ferry passengers around in urban areas via an app, but Amazon also could use the vehicles to deliver packages. Seattle-based Amazon also has tested sidewalk crawling robots and drones as alternative delivery methods.

In the statement, Amazon highlighted Zoox’s “ground-up vehicle” that “focuses on the ride-hailing customer.”

Founded in 2014, Zoox had outsize ambition and financial backing. The startup wanted to build a fully driverless car by this year. However, after a 2018 funding round that valued Zoox at $3.2 billion, the startup’s board voted to oust CEO Tim Kentley-Klay. The executive criticized the move, saying the directors were “optimizing for a little money in hand at the expense of profound progress.”

Amazon shares were little changed the morning of June 26 in New York. They have risen 49% this year.

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