Amazon invests in self-driving startup Aurora amid efforts to cut delivery cost

Amazon (AMZN) has been deepening its presence in the transportation sector, after launching its own logistics service last year in a market dominated by parcel giants like FedEx (FDX). Considering the close connection between retailing and transportation, the e-commerce firm this week took baby steps to join the rapidly growing autonomous vehicle sector.

Just days after claiming in an SEC filing that currently, it is competing with the market-leaders in the freight forwarding industry, Amazon invested an undisclosed amount in autonomous transportation startup Aurora Innovation, which is currently valued at $2 billion. In the $530-million funding, a group of venture firms including Sequoia Capital also participated.

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The latest funding makes Aurora well equipped to take forward its capital-intensive research activities to fine-tune the technology. Being one of the top retailers, Amazon incurs high shipment costs every year. An effective measure to reduce the delivery costs, which touched $27 billion last year, is to deploy driverless or semi-autonomous vehicles for parcel movement.

Aurora is the latest self-driving technology startup to be acquired by a large corporate. In the past, such transactions mostly involved automotive manufacturers like Ford Motor (F) and General Motors (GM). But, Aurora has a slightly different business model – it develops autonomous vehicles in collaboration with the likes of Hyundai, Volkswagen, and China-based Byton.

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Co-founded by Sterling Anderson, who earlier headed the team that designed Tesla’s (TSLA) Model X, Aurora is led by Chris Urmson, formerly a senior executive at Alphabet’s self-driving car unit Waymo.

Since last year, the market has been abuzz with reports that Amazon is building a team of experts to develop driver-less transportation technology, which was substantiated by the company’s tie-up with Toyota to pursue the movement of select merchandise in robo-trucks.

The latest funding makes Aurora well equipped to take forward capital-intensive research activities to fine-tune the critical technology

Having a dedicated fleet of self-driving delivery vehicles can bring greater efficiency, while saving significant manpower and ensuring the safety of employees. There are unconfirmed reports that Amazon is already using autonomous trucks for delivery service.

Meanwhile, deals involving high-tech vehicle manufacturers evoke interest among market watchers, for the prospects of putting such technologies to test in real-life situations.

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