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Comment by paxys | Hacker News Reader

I don't know why Amazon doesn't just buy Rivian already. Their stock price is in the dumps, and Amazon as a business has gone all in on their trucks. Worst case – Rivian ends up just being Amazon's in-house delivery van manufacturer, and the costs can be rolled up into their overall logistics business. Best case – Rivian's business is a commercial success and Amazon gets to play in that space. The worst case of not buying them is that the company goes out of business and Amazon now has a fleet of trucks that will go obsolete once their parts need replacing. ~$17B, while not chump change, is definitely affordable for Amazon.

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I dont know if that best case is in Amazon's interest. That is to say, they might not want to play in that space and it is pretty far from it's core competencies.

Financially, Amazon can currently benefit from Rivian selling vehicles at a loss. If Amazon purchases Rivian, Rivian's losses are now Amazon's. They would be out both the purchase price, and ongoing expenses.

If Rivian succeeds, they will be a good supplier. If Rivian will fail, Amazon doesnt want to be the one holding the bag.

Protecting the supply chain of parts for 10k vehicles is not worth much.

If they don’t want to play in that space why do they own Zoox?

They can also still buy it for free if/when it fails

Why would you by something that doesn't make money and nobody else wants?

Because it's making things that are useful to you. The cost of operating Rivian as a zombie company for a few more years might be less than the cost of replacing their vans or finding another supplier for parts.

(You might say that in that case Amazon should be willing to pay enough for those parts/maintenance to make Rivian profitable, but they might be willing to pay more for an in-house department that will operate the way they want than for an external company that might waste money continuing to chase other revenue sources instead of gracefully winding down)

I guess we just differ on our understanding of Van maintenance cost.

Rivian is worth 17 billion today, and loses a billion per year.

Buying them to support the Amazon fleet would be paying 1.7 million per van upfront, then 100k/year, just to ensure spare parts manufacturer exits.

That is one hell of a cost to avoid buying 3rd party parts.

In a scenario where Rivian fails and AWS buys it out of bankruptcy it would presumably cost a lot less than 17 billion. That it's currently burning a billion per year is exactly why it might be worth bringing in house, where they can presumably cut that by a lot.

Also don’t forget that AWS pretty much lets Amazon benefit from all that VC money without being directly exposed to the risk.

I don't understand what you mean

VC funded startups start with AWS free credits build a bloated service and then are too big to move (vendor lock in) but they still have VC money to pay the bills

1. What percentage of AWS revenue is VC funded companies? I'm sure it's a good percentage, but AWS also sells to a lot of fortune 500s.

2. AWS takes on a lot of risk. They buy hardware with lifespans measured in years and sell its use by the second. Not to mention directly competing against major divisions of Microsoft and Google cannot feel comforting.

Andy Jassy has said publicly plenty of times that less than 5% of all IT spend is on any cloud provider. There is still a huge market.

Just because cloud spends are low doesn't mean there's more room to gain for cloud. The biggest expenditure in IT, onprem or cloud, is talent. Which is why a lot of CIOs at big corps are "excited" about the whole "ChatGPT for code" trend (not that most of them don't have much experience in the space to actually evaluate that premise).

I’m assuming the CEO of Amazon and former CEO of AWS has enough sense to be talking about spending that could be converted to cloud and it employees

They're looking at it in absolute terms. 5% to 6% is a 20% jump worth billions. But 5% to 20%? Tough luck.

I've worked with many, many companies as an employee of Amazon. The majority of the companies I've worked with aren't VC funded companies. That's anecdotal of course. But it'd be incorrect to imply that AWS gets most of its revenue from VC funded companies.

Amazon’s core competency is what exactly? Grocery stores? cloud computing? Streaming video and music? Devices? Logistics? Advertising?

The worlds largest counterfeit goods seller.

Why buy Rivian when you can buy RYVBIAX?

Tax avoidance

https://itep.org/amazon-avoids-more-than-5-billion-in-corpor...

That's why SMEs cannot compete against Amazon

Every company avoids taxes. Shit, I damn avoid taxes whenever I can.

Blame the game, not the player.

It ain’t my fault they wrote the laws wrong. And I’m not giving away my advantage when no one else is gonna.

If everyone is doing it, it's not even an advantage, but merely a necessity to be competitive.

Correct, yep. Which is why tax avoidance is not a crime, but tax evasion is.

It would be a rather strange conversation with an accountant doing your taxes, if you walked up and said “hey, can you make it so that i pay more taxes than the legal minimum I am obligated to?”

Not really, because as pointed out large companies can do it much better than small ones.

Every company does not have as many resources and tax lawyers to minimize their tax burden as Amazon.

No, and nor do I compared to a rich person.

But is telling anyone "don't minimize your taxes" really practical?

Nobody said that. Nobody was hating the player.

Agreed, and that's why corporate taxes shouldn't exist. They functionally penalize small business under every system that exists.

The player is often also creating the game as they play, so I will continue to blame them.

That's not why, if you think competitors are not doing everything they can to avoid taxation you're naive.

Yes, I’m sure if it weren’t for the taxes, they wouldn’t have any problem creating billions of dollars worth of warehouses, spending even more money for a logistics network.

Operating cloud servers (AWS) and eCommerce incl. fulfillment. Ads are a grow out of the latter, while streaming is based on the former.

Running a large scale manufacturing operation in-house is comoletely different, and something Apple doesn't do neither.

Plus, outside of the core competency issue, Rivian makes trucks and commercial vans.

UPS or others could start to buy Rivian products. But if Amazon owns them, and is using them for their own fleet, thus competing with Amazon Delivery Services, UPS would then be buying from the competition

This could kill potential deals.

Absolutely correct. Why buy the cow when you can get the milk for free?

Well, the way you describe it, it sounds like waiting makes the most sense. If Rivian's price is in the dumps, and there's a chance they go out of business... why not wait? Buy a distressed Rivian later on, or buy their assets in a bankruptcy proceeding.

The risk is that in an effort to survive the company makes decisions that aren't in Amazon's best interests.

Rivian is in good shape in terms of runway with a plan to reduce costs they have been successfully executing on.

Amazon is getting the trucks below cost, is one reason.

Vehicle manufacturing isn't related to Amazon's business.

They wouldn't gain any strategic advantage over any of the competitors in their industry by owning a vehicle manufacturer.

The only value of EV delivery trucks for Amazon is helping their brand image and reducing their fuel and maintenance expenses. They can get that with any electric delivery truck manufacturer.

The only thing that owning Rivian would do is put pressure on their profits.

Amazon did buy Kiva, their warehouse-robot manufacturer, many years ago. But a delivery truck is a much more generic product that you don’t benefit from owning and vertically integrating the same way.

Yep. Optimizing or improving the efficiency of warehouse operations is much closer to a core competency for the company.

Even UPS, who design their own delivery vehicles, contract out the manufacturing.

> Vehicle manufacturing isn't related to Amazon's business.

This is a somewhat funny thing to say about a company whose "business" has gradually come to include: B2C e-commerce, B2B e-commerce platforms, web hosting (AWS), brick and mortar grocery store chains (Whole Foods and Fresh/Go), pharmaceuticals, healthcare (One Medical), Twitch, streaming video games (Luna), film and television production (in-house and through its acquisition of MGM), consumer electronics (Kindle, Alexa, Fire), home security (Ring), robotics, and satellites (Kuiper).

How many of these were "related" to Amazon's business, which, as we all know, is selling books through the mail?

And of course fintech

https://www.forbes.com/sites/moorinsights/2021/04/30/is-amaz...

Nearly everything business you listed is about selling a high volume of products and services with relatively low marginal cost of production or distribution. That's true for food, books, movies, and compute. The robots are clearly related to warehouse automation.

Amazon sells very few things that cost as much as a car, and when they do, they don't manufacture them, because each transaction carries a lot of risk and overhead.

That's not to say they'd never acquire them, but the lack of business alignment makes it seem less likely.

Vehicle manufacturers face liabilities that almost no other product maker does. There's the potential for almost infinite downside.

How so? Admittedly cars are much more likely to kill third parties than other consumer products, but you could also incur massive liability by eg. selling $10 toasters that violently combust while sending a rain of hot shrapnel in all directions.

Well they already have that liability. Can’t see a reason to add more.

If they are getting a great deal on the vans already, why think about buying a struggling company?

> The worst case of not buying them is that the company goes out of business and Amazon now has a fleet of trucks that will go obsolete once their parts need replacing.

They could buy them a whole lot cheaper then as just an in-house van manufacturer.

Running a profitable car company is not easy (just as building a orbital rocket is not easy)

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