Over the last 18 months of the pandemic, many of us have come to rely on Amazon more than ever. Unprecedented numbers of Amazon vehicles have crisscrossed the world’s highways, delivering everything, down to our most basic needs, to our doorstep. The number of warehouse and delivery drivers Amazon hired to keep up during this time was unprecedented, kicking off with a 100,000 employee hiring spree in March of 2020, followed by an additional 75,000 hires in April 2020 and many more down the line. Package delivery is still, in many ways, the lifeblood of Amazon’s business, even as Amazon Web Services (AWS) has become a vital part of the company’s profit margins. As such, it makes sense that Amazon is playing a role in the development and deployment of the next generation of delivery vehicles, from long-haul trucks to last mile delivery vans.
In Amazon’s 2020 Sustainability Report released this week, the company shared that it had placed an order of 100,000 new electrical delivery vehicles (EVs) from Rivian that it will deploy over the next decade. Today we’ll look at some big moves the company is making in the autonomous vehicle (AV) realm with another company I follow closely: Plus. Formerly Plus.ai, this California-based startup is known for its autonomous trucking platform, PlusDrive. Let’s take a closer look.
This week, we learned via a Form 8-K SEC filing from Plus that Amazon has contracted to purchase at least 1,000 Plus Retrofit units for its delivery fleet in a deal worth up to $150 million. As the name implies, Plus designed these systems to retrofit existing trucks with next-generation levels of autonomy. While these vehicles will still require a human driver inside (to supervise the system, and step in if the system goes beyond its system capabilities or fails in some capacity), the deployment of the retrofitted fleet will still be a massive milestone for both the trucking and AV industries.
The other part of this story is that Amazon was granted a warrant to buy a 20% stake in Plus, even more closely tying its future to autonomous delivery methods. Contingent on the $150 million Plus Retrofit deal going through, which it did, Amazon will have eight years to execute the warrant. Plus would receive an estimated $500 million from the sale. Between this and Plus going public with a SPAC (Special Purpose Acquisition Company) last month, the company appears to be having what some might call “a moment.”
I appreciate Plus’s incremental strategy of getting its driver-in autonomous systems on the roads and generating revenue today rather than waiting for years ‘til fully driverless technology is ready, as I believe it gets Plus out in front of its autonomous trucking competitors, who have yet to bring a product to market. The Amazon win is doubly significant for Plus, considering which companies Amazon passed up for the contract. TuSimple, thought by some to be the leader in the space, didn’t get it. Neither did Aurora, which Amazon already has investments in, or Embark, which Amazon reportedly hired to haul freight back in 2019.This huge win is a validation of Plus’s technology and strategy.
Smarter and safer
Although humans will remain in the equation, for now, technology like PlusDrive promises to make Amazon delivery trucks safer, more fuel efficient, and more comfortable for drivers. Trucking can be dangerous, and remarkably often, deadly. According to the National Highway Safety Administration, 2018 saw the highest level of large truck occupant fatalities in 30 years, as well as a 13% rise in pedestrian deaths caused by accidents involving these trucks. There are also many reports of trucker shortages and high turnover rates of drivers. If PlusDrive can make Amazon delivery jobs safer and more comfortable, Amazon will have better luck retaining long-haul drivers. Add to that a 10% savings in fuel costs made possible by PlusDrive and you can see why this technology has a clear ROI for fleets.
Also of note is autonomous trucking’s potential reduction in carbon emissions and fuel costs. AVs are one of the tactics Amazon is leveraging to achieve its Climate Pledge—a commitment to meet the net-zero carbon reduction goal set forth by the Paris Climate Agreement by 2040 (10 years ahead of the Paris timeline). This goal is a significant priority for the e-commerce giant, and I believe it is currently driving many of its decisions.
Amazon’s investments in both EVs and AVs over the past several years tell us it sees the technology as crucial to the future of its business. In addition to Aurora, Amazon has also invested in Lion Electric (an electric truck and school bus manufacturer), Rivian (an electric vehicle company) and Zoox (a company developing autonomous robotaxis).
Suppose Amazon decides to go through with the purchase of 20% of Plus’s shares. In that case, it will have even more significant, diversified stakes in the future of electric and autonomous vehicles, not to mention valuable technology it can use in its delivery and logistics network. Plus, meanwhile, will benefit from Amazon’s robust backing—especially if it becomes the partner of choice for Amazon’s self-driving heavy trucks. Everybody wins—the hallmark of a good deal.
Note: Moor Insights & Strategy writers and editors may have contributed to this article.