Feb 20, 2019

Amazon's autonomous vehicles bet could make deliveries even cheaper

Illustration: Sarah Grillo/Axios

Amazon has been pouring money into autonomous vehicle technology, a strategy that could squeeze its retail competitors by allowing it to control the entire shopping process from click-to-buy to delivery.

What's new: The online retail giant was fairly quiet about its AV ambitions until now. But with a rapid-fire series of investments, Amazon is declaring its intention to automate shipping and logistics every step of the way — from its warehouses to highways to your doorstep.

The big picture: Shoppers have become accustomed to almost free, lightning fast delivery. Without a driver, AVs would be able to deliver goods even cheaper and faster, KPMG researchers say, increasing pressure on brick-and-mortar retailers and triggering even more online shopping.

  • McKinsey predicts autonomous deliveries will slash retailers’ shipping costs by 40%.

Context: Several big-name retailers are already experimenting with driverless delivery.

  • Kroger is partnering with the newly flush Nuro to deliver groceries with robot vehicles in Arizona.
  • Walmart has enlisted Waymo, Google's self-driving car unit, to bring shoppers to its stores in autonomous minivans, though it isn't delivering goods in AVs.
"The economics of pulling the driver out of the vehicle to get the last mile or the last 50 feet is astonishing. That's why everybody is investing in AV technology."
— Gary Silberg, automotive sector leader, KPMG

Yes, but: Amazon is bigger and stronger. Its Prime membership business, worth an estimated $100 billion per Morgan Stanley, has already overwhelmed the competition with its speedier and cheaper delivery.

  • Last holiday season, the company kicked off a race to the bottom on shipping prices by offering free delivery for weeks.
  • Amazon already has thousands of trucks, a handful of airplanes and even some drones that it uses to deliver packages.
  • Amazon faces the same challenges as others — AV technology is new and widespread deployment is not a given. But adding its own fleet of autonomous trucks could drive its prices down even further and thwart rivals' attempts to leverage AV tech through Waymo, Aurora or others.

Details: Amazon formed a small team to investigate driverless technology several years ago and partnered with Toyota in early 2018 to explore AV deliveries. It has also been spotted using self-driving trucks to haul cargo in Arizona. But in recent weeks, they've doubled down...

  • In January, Amazon introduced Scout, a cooler-sized, electric robot for last-mile deliveries.
  • Earlier this month, it joined a $530 million investment round in AV startup Aurora Innovation, led by an all-star team of engineers from Google, Tesla and Uber.
  • A week later, it led a $700 million investment in Rivian, whose modular electric chassis can be adapted for virtually any type of vehicle.
  • With Aurora's self-driving system and Rivian's flexible "skateboard," Amazon could potentially fashion different sized AVs for any purpose.

The bottom line: Amazon has a history of expanding into areas within its own value chain wherever it can be successful, notes Roy Bahat of Bloomberg Beta. “Automated vehicle technology is now mature enough that it's within the striking distance of Amazon's long arm.”

Go deeper: The next five years of Amazon

Go deeper

Blue Cross Blue Shield insurers sue CVS, alleging drug pricing fraud

Photo: John Lamparski/SOPA Images/LightRocket via Getty Images

Six Blue Cross Blue Shield insurers have sued CVS Health, alleging the pharmacy chain overcharged them based on "artificially inflated prices" for generic drugs and concealed the true cash prices of those drugs.

The big picture: CVS has faced legal scrutiny over its cash discount programs since 2015, and this lawsuit adds big names to a mounting problem.

World coronavirus updates

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Axios Visuals

New Zealand has only eight active novel coronavirus cases and no COVID-19 patients in hospital after another day of zero new infections. However, the death toll rose to 22.

Zoom in: A top health official told a briefing a 96-year-old woman "was regarded to having recovered from COVID-19 at the time of her death, and COVID-19 is not recorded as the primary cause of her death on her death certificate." But it was decided to include her in the overall tally of deaths related to the virus.

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 10 p.m. ET: 5,690,951 — Total deaths: 355,575 — Total recoveries — 2,350,071Map.
  2. U.S.: Total confirmed cases as of 10 p.m. ET: 1,699,073 — Total deaths: 100,396 — Total recoveries: 391,508 — Total tested: 15,192,481Map.
  3. Public health: CDC issues guidelines for reopening officesFauci says data is "really quite evident" against hydroxychloroquine.
  4. States: California hospitals strained by patients in MexicoTexas Supreme Court blocks mail-in expansion to state voters.
  5. Business: MGM plans to reopen major Las Vegas resorts in June — African American business owners have seen less relief from PPP, Goldman Sachs says.
  6. Tech: AI will help in the pandemic — but it might not be in time for this one.
  7. World: EU proposes a massive pandemic rescue package.
  8. 1 🎶 thing: Local music venues get rocked by coronavirus.
  9. 🎧 Podcast: Trump vs. Twitter ... vs. Trump.
  10. What should I do? When you can be around others after contracting the coronavirus — Traveling, asthma, dishes, disinfectants and being contagiousMasks, lending books and self-isolatingExercise, laundry, what counts as soap — Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingHow to minimize your risk.
  11. Other resources: CDC on how to avoid the virus, what to do if you get it, the right mask to wear.

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Updated 3 hours ago - Politics & Policy