& # 39; very excited & # 39; about the automotive industry



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The founder, president, CEO and president of Amazon, Jeff Bezos, gives the green light to the speech he delivered at an event on Blue Origin's space exploration projects in Washington, USA, May 9, 2019.

Clodagh Kilcoyne | Reuters

At an all-round staff meeting in March, Amazon's president, Jeff Bezos, told his employees that he was fascinated by recent developments in the auto industry, adding that was one of the main reasons why Amazon had driven a $ 700 million investment in the Rivian electric vehicle startup in February.

"If you think of the automotive industry right now, there is so much going on with Uber-ization, electrification, the connected car – so it's a fascinating industry," said Bezos according to a recording of the meeting heard by CNBC. "It's going to be something very interesting to watch and participate, and I'm very excited about this industry."

Bezos' comments give a rare glimpse of his interest in the auto industry, to which Amazon has committed in February through its investments in Rivian and Aurora, a new autonomous technology company. Investing in standalone technology could eventually help Amazon deliver faster, cheaper delivery, as well as automation in other areas, such as its box-free grocery stores.

Rivian is best known for its electric trucks and raised $ 1.4 billion in financing, including $ 500 million from Ford in April. Aurora, a self-driving technology startup led by former Uber, Google and Tesla executives, would now have a value of more than $ 2 billion, after a $ 530 million fundraiser in February.

Following these two investments, Amazon's participation in private companies climbed to nearly $ 1.4 billion last quarter, marking the first crossing of the billion dollar mark since the publication of this figure in 2015. That's an increase of nearly $ 1 billion from the previous quarter and about five times more than it had just two years ago, the deposits show.

Amazon does not report the amounts of individual investments, but indicates the total value of its shares and its investments in guaranteed shares in both public and private companies.

Amazon has not responded to a request for comment.

Increasing investments

Investing in standalone companies gives Amazon "better information on advanced technologies" that could directly help its core business of e-commerce, according to Gene Munster, an analyst at Loup Ventures. The investment in electric and autonomous cars, for example, could give an idea of ​​the improvement of Amazon's last mile logistics strategy and potentially reduce its overall shipping costs, has he declared. Amazon's shipping costs jumped 21% to $ 7.3 billion in the last quarter.

"It's a form of outsourced R & D," said Munster.

Autonomous technology could help Amazon in many ways. In January, for example, Amazon rolled out a new automated delivery robot called Scout, and also partnered with Embark, an autonomous start-up truck, to handle parts of its cargo. At the first launch of Amazon Go stores in 2016, Amazon reported using the same technology used in standalone cars.

More importantly, the investments reflect Amazon's growing appetite for spending on other companies, both public and private, facing slower growth despite record profits and cash flow.

In the first quarter, Amazon posted operating profit of $ 4.4 billion and a cash balance of $ 47 billion, record highs. But the quarterly growth of its turnover is only 16.9%, its lowest rate since 2015.

At the same time, the documents show that Amazon spent a total of $ 1.2 billion in cash payments related to "acquisition activities and other investment activities" in the first quarter, an amount of record for a single quarter excluding the third quarter of 2017, with 13.7 billion USD invested Whole Foods. During the quarter, Amazon bought Eero for about $ 100 million and CloudEndure for $ 250 million, while its two largest investments were in Rivian and Aurora, according to Pitchbook. Amazon continues to be an aggressive investor this quarter after leading the $ 575 million fundraiser in Deliveroo last week.

Although it is a small amount compared to the total business revenue of Amazon (232 billion USD in 2018) or its assets (178 billion USD in the first quarter), this remains a noticeable change from its reputation as a discreet private investor, according to Daniel Aobdia, an accounting professor at Northwestern University.

"Amazon is stepping up its investment in start-up businesses, which has been facilitated by the increased cash flow from operations," said Daniel Aobdia, professor of accounting at Northwestern University . "This is an interesting development because Amazon is interested in developing its business in several directions."

At the March staff meeting, Mr. Bezos attempted to moderate his expectations by stating that he was not yet considering Rivian's investment as Amazon's next growth engine. He added that it was still only a minority investment and that electric cars would not become the next major pillar of the company.

But he then pointed to another reason why he was attracted to Rivian's investment: its founder and CEO, R.J. Scaringe. The qualifying as "incredible", Bezos touted Scaringe 's ten – year experience in the automotive sector, adding that his personality perfectly matched the culture and values ​​of the automobile industry. Amazon.

"As with most of our major investments and acquisitions, we are always looking for mission-driven entrepreneurs – missionaries rather than mercenaries," said Bezos. "And the guy who runs the business, a guy named R.J., is one of the most missionary entrepreneurs I've ever met."

WATCH: Ford Invests $ 500 Million In Rivian Electric Truck Builder

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