Illustration: Eniola Odetunde/Axios

Amazon is emerging as a transportation juggernaut that could threaten carmakers, package delivery firms and even ride-hailing companies.

Why it matters: By building its own logistics ecosystem and investing in promising electric and autonomous vehicle startups, Amazon could lower its shipping costs to the point that partners like UPS become competitors instead.

What's new: Amazon is in advanced talks to buy self-driving tech startup Zoox, the Wall Street Journal reported this week.

  • A deal, if it happens, would follow big investments in another automated driving startup, Aurora Innovation, and Rivian, a maker of electric trucks.

The news set off a wave of speculation among investors and AV experts.

  • Self-driving technology is "a natural extension" of Amazon’s efforts to build its own logistics network, and could save the behemoth more than $20 billion a year on shipping costs, Morgan Stanley analysts wrote on May 27.
  • Amazon is becoming a "clear competitor" to companies like Tesla and GM, they said, while UPS and FedEx "will need to respond to keep up."
“We often hear from investors that Tesla could potentially be the Amazon of transportation. But what if Amazon is the Amazon of transportation?”
— Morgan Stanley auto industry analyst Adam Jonas, in a May 17 report

The intrigue: Buying Zoox could potentially even open the door for Amazon to compete in the ride-sharing and food delivery industries.

  • Discounted ride-sharing for Prime members, for example, could help Amazon attract and keep more customers, Morgan Stanley suggested.

Amazon has more than 210 transportation-related patents on everything from drones to automated ground vehicles, according to a Reuters analysis.

  • Among them is a 2017 patent to provide an on-demand transportation service through a network of self-driving vehicles, Reuters reported.

A more likely scenario, according to Guidehouse Insights analyst Sam Abuelsamid:

  • Amazon could convert Zoox's planned robo-taxi into an automated delivery van that would serve as a mobile version of its Amazon lockers.
  • Rivian, which already has a contract to build 100,000 electric delivery vans for Amazon, could build these smaller vehicles, too, he said.

The big picture: Amazon delivers more than 10 billion items worldwide each year and has become the fourth-largest shipping service in the U.S.

  • More than half of all Amazon packages in the U.S. are delivered by its own vehicles.
  • Shipping costs are among the online retailer's biggest expenses — on track to hit $90 billion by 2023, projects Morgan Stanley — and will keep rising as more consumers opt to stay home and do their shopping online.
  • Its logistics operation includes 10,000 truck trailers, a network of ocean freighters, thousands of last-mile delivery vans and a smattering of sidewalk robots and experimental drones.
  • By 2021, its Amazon Air operation will have 70 branded cargo jets.
  • In September, Amazon ordered 100,000 electric delivery vans from Rivian as part of a broader climate pledge.

What to watch: Now could be the best time for Amazon to dramatically increase the size of its air fleet, says Bank of America analyst Justin Post.

  • Aircraft prices are depressed because battered airlines have cancelled orders during the pandemic.
  • Researchers at DePaul University say Amazon could have as many as 200 aircraft in its fleet within 7 to 8 years, nearly matching UPS' 275 planes.

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