February 14, 2019

Breakingviews: Amazon primes delivery of its vehicular future

by Breakingviews.

Amazon.com is priming delivery of its vehicular future. The $810 billion retailer may take a stake in electric-truck maker Rivian. That’d be its third mobility play this year. It’s unlikely Amazon aims to build cars. Instead, it’s trying to tackle mounting logistics concerns.

Jeff Bezos’s ambitions for the company he founded and runs are astoundingly large. Amazon is still growing at a breakneck pace – about 20 percent per year – and its products range from grocery delivery to web services to filling prescriptions.

One of the key elements to Amazon’s success is its ability to deliver goods quickly – and, thanks to swallowing some of the cost, cheaply. The company spent $28 billion on shipping in its last fiscal year. That expenditure will rise as the company expands into more areas. Yet in the past Amazon customers only covered just over half of these costs. Bezos wants to have more control over the pipeline, too, rather than outsourcing to national mail carriers or the likes of UPS – last year Amazon ordered 20,000 delivery vans.

Electric and autonomous vehicles ought to cut the costs of bringing buyers their purchases, making it easier for a whole range of companies to compete. Ford, for example, has been working with delivery company Postmates as well as Domino’s Pizza. General Motors’ Cruise division started a pilot program with DoorDash, which shuttles take-out orders from restaurants to customers.

Amazon has to embrace automation across its entire process, or risk being outplayed. It has already done so in its own warehouses: In 2012 it bought Kiva Systems to install robots to deliver items to human workers. It has since expanded their use.

Doing so outside of such a controlled environment is harder to do alone. That’s why Amazon last month signed up as one of the testers of Toyota’s electric, autonomous delivery-vehicle concept called e-palette. It also explains the company showing up among those investing $530 million on self-driving car startup Aurora last week. Amazon’s proficiency in handling massive amounts of data in its web-services business is handy, too – both for its own operations as well as for autonomous-vehicle producers.

These all give Amazon needed insight into progress in this area – and perhaps first dibs on any successful vehicles produced. That’s key to keeping both its customers and shareholders happy.

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