Amazon to buy self-driving technology company Zoox

Key Points
  • Zoox was valued at over $3 billion in 2018, but has struggled with management turnover in its efforts to develop a self-driving car.
  • The company hired Qatalyst Partners to help it find a buyer.
  • The acquisition is notable for Amazon, which paid $13.7 billion for Whole Foods in 2017. 

In this article

Andrew Evers

Amazon has just taken its boldest step yet into self-driving vehicles, acquiring six-year-old start-up Zoox, the company announced Friday.

Amazon said the deal will help bring Zoox's "vision of autonomous ride-hailing to reality." Zoox will continue to operate as a standalone business within Amazon, with CEO Aicha Evans and Jesse Levinson, the company's co-founder and CTO, continuing to lead the team, Amazon said. 

Terms of the deal weren't disclosed, but the Financial Times previously reported that Amazon would pay more than $1.2 billion to acquire Zoox. An Amazon spokesperson declined to comment. 

"Zoox is working to imagine, invent, and design a world-class autonomous ride-hailing experience," said Jeff Wilke, Amazon's CEO of global consumer, in a statement. "Like Amazon, Zoox is passionate about innovation and about its customers, and we're excited to help the talented Zoox team to bring their vision to reality in the years ahead."

Shares of Amazon moved slightly higher following the news. 

It's a large deal for Amazon, which acquired Whole Foods for $13.7 billion in 2017 but has otherwise generally made acquisitions of less than $1 billion. With regulators bearing down on Amazon's every move because of its dominance in e-commerce and treatment of warehouse workers during the coronavirus pandemic, the purchase of Zoox is certain to attract scrutiny from lawmakers and criticism from rivals.

It's not immediately clear what Amazon plans to do with Zoox's technology, but it's possible Amazon could integrate Zoox's offerings into its logistics network to offer cheaper and faster delivery, as well as its cashierless grocery stores.

Zoox, which was valued at $3.2 billion in a financing round two years ago, says on its website that it "is creating autonomous mobility from the ground up." But the Silicon Valley company has struggled due to turmoil in its executive ranks (co-founder and ex-CEO Tim Kentley-Klay was fired from his leadership post in 2018), a legal fight with Tesla over alleged theft of trade secrets and overall delays in bringing self-driving technology to market. 

Zoox cut about 100 jobs, or 10% of its staff in April, just after laying off about 120 contract workers amid California's shelter-in-place orders. The Wall Street Journal reported in May that Amazon was in advanced talks to buy Zoox for less than its prior $3.2 billion valuation. Deal chatter surfaced even earlier, when The Information reported that the company had hired Frank Quattrone's Qatalyst Partners to help find a buyer. 

Jeff Bezos, CEO, Amazon
Mark Ralston | AFP | Getty Images

Amazon CEO Jeff Bezos has made no secret of his excitement about the potential of autonomous driving. The company has been using self-driving trucks developed by Embark to haul some cargo on the I-10 interstate highway, and Bezos told employees at an all-hands staff meeting last year that he's fascinated by recent developments in the auto industry.

In early 2019, Amazon led a $700 million investment in electric vehicle start-up Rivian and also invested in Aurora, co-founded and led by Chris Urmson, the former technology chief of self-driving cars at Alphabet. While the acquisition of Zoox is big by Amazon's standards, the company will have to invest significantly more in the business to eventually bring the technology to market.

Companies including Alphabet's Waymo, GM's Cruise, Uber, Tesla, Ford and a host of start-ups have been developing autonomous car technology for several years. However, technical, operational and regulatory challenges, including where and how to safely test the vehicles, proved more challenging than anticipated.

Zoox's technology includes wheels that can turn sideways for tight maneuvers, like truly parallel parking. Waymo, Aurora and others have developed automated driving systems that they integrated into vehicles made by established automakers. 

Zoox had been road testing its autonomous technology in retrofitted Toyota Highlanders around Las Vegas and San Francisco. Amazon's leadership will "markedly accelerate" Zoox's ability to deliver that technology "to the world," Levinson said in a statement. 

—CNBC's Lora Kolodny contributed to this report.

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