Preparing for the Mobility Revolution
Why Amazon Is Investing Massively in Mobility Tech
Last year, Amazon spent $27B on shipping, i.e., sortation, delivery centers and transportation costs for an estimated 6 billion parcels delivered for $233B in sales. The e-commerce giant has been innovating in their fulfillment centers, maximizing automation in order to drive efficiency and throughput, as well as to enable an increasing amount of same-day deliveries. The company is also progressively bolstering its own shipping capabilities, while aggressively pursuing business and tech partnerships to address the last mile. They are leveraging the major push we are observing in the mobility space, especially electrification, autonomous driving and new modes of transportation.
Amazon is going electric with Rivian
As cities will increasingly restrict access to non-electric vehicles, Amazon will need to massively increase the portion of electric delivery vehicles in its fleet. This is about the ability to operate in the future — and hopefully to limit the negative impact of booming home deliveries on our climate.
In early 2019, Amazon led a $700M investment round in the Michigan-based, EV startup Rivian. Founded in 2009, the company will introduce a pair of long range EVs, a rugged SUV and a pick-up truck, starting in late 2020. The company also intends to offer its 4-motor skateboard to other OEMs. The e-commerce giant made its intention very clear when they recently announced an order at Rivian for 100k electric delivery vans (picture above) to be deployed between 2021 and 2024.
Amazon is going autonomous with Aurora Innovation
There is no denying that mobility will eventually be mainly autonomous — though more slowly than expected still a year ago. This will have a significant impact on delivery cost, provided these (more expensive) vehicles have a high utilization rate. Several startups, such as Nuro, Gatik or Udelv, are developing autonomous solutions dedicated to the delivery of goods to stores, homes, etc. Amazon must be at the forefront of this trend to secure tomorrow’s profitably.
In January 2019, Amazon participated in a $530M funding round in Silicon Valley-based Aurora Innovation. Founded in 2017 by probably the most experienced team in the business, the startup is developing a full software stack (and some hardware) to enable Level 4 autonomy.
Earlier this year, Amazon also partnered with autonomous trucking startup Embark to test autonomous driving on US interstates in an effort to address the “middle mile.”
Amazon is going multimodal with Deliveroo, Dispatch and drones
Urban roadways are increasingly crowed, and non-electric vehicles will eventually be banned from many city centers. Consequently, clean, small footprint solutions must emerge to deliver packages on doorsteps within hours as is now often the norm.
Earlier this year, Amazon led a £450M ($675M) round in UK-based Deliveroo — though the initiative was paused at the request of UK regulators. Deliveroo is a British 2-wheeler-based food delivery company founded 6 years ago. The startup would provide Amazon with a stronger footing in this space to replace its now closed Amazon Restaurants, and would protect the e-commerce giant against Uber Eats. The acquisition would also leverage their $14B acquisition of grocery chain Whole Foods, which now offers 2 hour grocery deliveries. Moreover, Deliveroo could expand its services into package delivery, which could preemptively position it against Uber’s potential expansion into package delivery.
Amazon does not intend to stay just on the roadways. In 2017, they acquired Silicon Valley-based, sidewalk delivery robot Dispatch, apparently interested in the company’s patents. The e-commerce giant also developed its own delivery robot, a small six-wheeled electric vehicle. Earlier this year, Amazon tested a new service called Scout, next to its Seattle HQ as well as in California, using these vehicles.
Amazon’s ambitions do not stop here. Drones will allow to simply forget about ground-based congestion. To this end, Amazon developed an electric drone capable to carry and deliver packages weighing up to 2 kg over 10 km within 30 minutes. Based on this device, Amazon’s Prime Air received approval to operate from the U.S. Federal Aviation Administration. Drone deliveries to customers are expected within months.
Electrifying and — even more so — automating transportation are long term endeavors, which will require massive investment before we see significant deployment. However, the resulting solutions will benefit good transportation, possibly earlier and probably with better financial returns, than people transportation. Why would Amazon care otherwise?
Managing Director, Orsay Consulting
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