Amazon’s autonomous vehicle strategy is becoming clearer (AMZN, GOOGL, TSLA, UPS, FDX)

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E-commerce giant Amazon invested in Aurora, a California-based self-driving car technology startup, as part of the firm’s recent $530 million funding round, according to CNBC.

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The round, which was led by Sequoia Capital, values Aurora at $2.5 billion. The startup was founded by a trio of longtime execs from the autonomous vehicle (AV) groups of Google, Tesla, and Uber.

Amazon’s investment in Aurora comes nearly two years after it formed a research group to study how it could best utilize AVs. While little else has been revealed about the group since then, the investment in Aurora appears to be one of the first times the group’s work has materialized publicly.

Amazon’s investment in Aurora is the latest in a recent spate of transportation and logistics moves. Formerly the sleeping giant in the logistics industry, Amazon appears to have woken up in recent weeks. In its annual report filed last week, the e-tailer acknowledged for the first time that it considers itself a transportation and logistics company.

And late last month, CNBC reported that Amazon was using self-driving truck startup Embark to haul freight along a small stretch of Interstate 10 in the southern United States. While Amazon’s investment in Aurora is just that — an investment, not a partnership — it signals confidence in the startup’s technology, and perhaps a desire to use its AVs once the tech advances.

Aurora’s AVs could eventually enable Amazon to improve the sustainability — and competitiveness — of its delivery services. Though Amazon’s logistics efforts are still in their infancy, we expect them to grow far more serious in 2019 and beyond.

Thus far, the e-tailer has been offering about 10% lower shipping rates than UPS and FedEx, the two leading US logistics providers. Undercutting legacy carriers is likely not a sustainable strategy — at least not without reducing the operational costs of deliveries at the same time.

As Amazon further builds out its logistics infrastructure, it will likely continue seeking to lower such costs through automated solutions, like its investments in smart warehouses or partnership with Embark. Eventually, Aurora’s AVs could provide a solution along those lines by automating last mile deliveries, which would net Amazon significant savings: McKinsey estimates that automating the last mile will cut out 40% of the costs. Aurora has the attention of the retail giant — now it just needs to prove its tech is viable.

Source: Business Insider