Dive Brief:

• Amazon is in "advanced talks" to buy Zoox, a California-based autonomous vehicle (AV) technology company started in 2014, according to an exclusive report from the Wall Street Journal.
• Morgan Stanley analysts wrote Wednesday that the deal could save Amazon more than $20 billion annually in shipping and transportation costs, Bloomberg reports. Yet, according to the Journal, the acquisition would value Zoox at less than its 2018 valuation of $3.2 billion.
• Earlier this month, The Information reported that the startup hired Qatalyst Partners to help it find a buyer. In a statement, Zoox told the Journal it's been "receiving interest in a strategic transaction from multiple parties." In a statement to Smart Cities Dive, the company declined to speak further on the matter, noting, "We do not comment on rumors or speculation."

Dive Insight:

While the deal has not been confirmed by the respective parties, it has sent automotive analysts and industry journalists into a frenzy of discussion around the implications of such an acquisition in the AV space.

"[A]utonomous driving could prove to be another area where deep-pocketed tech firms are ... able to strengthen their hand in the current environment relative to more cash-strapped peers," journalist Eric Jhonsa wrote for The Street.

Meanwhile, Silicon Valley Business Journal editor Cromwell Schubarth said the potential deal could "stoke growing antitrust concerns." This general concern has been floated by officials on the U.S. House Judiciary Committee's Subcommittee on Antitrust, Commercial and Administrative Law following talks of any mega-mergers, especially amid the COVID-19 pandemic.

"The last thing our country needs right now is expending valuable resources in response to a wave of mega-mergers during a time of crisis," Subcommittee Chairman Rep. David Cicilline, D-RI, said at an Open Markets Institute event in April.

The current COVID-19 pandemic has slowed many operations and deals to advance ambitious autonomous driving goals, but it has also highlighted the potential role of automated systems in maintaining a resilient society. Michael Sherwood, director of IT for the City of Las Vegas, recently told Smart Cities Dive that "automation is king," noting automated tech will give cities and companies a "competitive advantage" moving forward.

And for Amazon, a move into autonomous driving could be key for optimizing the company's delivery operations while also potentially moving the company into ride-hailing. Amazon teased this move in early 2019 with an investment in autonomous tech developer Aurora, which it quickly followed with an investment in electric vehicle (EV) startup Rivian. Amazon and Rivian teased plans for a new electric delivery van to hit the road in 2021.

Morgan Stanley Analyst Brian Nowak wrote in a report that Amazon's potential deal with Zoox could position it as "one of the few companies" to compete with Uber, Lyft and Waymo on autonomous ride-hailing, and as an advanced logistics competitor to UPS, Fed Ex and the U.S. Postal Service. Last year, Zoox pledged to launch a robotaxi network in Las Vegas.

For Zoox, the deal will likely come down to potential negotiations to ensure a fair valuation. Pitchbook Data analyst Asad Hussain told the Silicon Valley Business Journal that the startup's valuation is likely to decrease due to COVID-19, and suggested that a $1.1 billion price tag — a nearly 66% drop from its $3.2 billion valuation — would be fair.