Dive Brief:

• Amazon is in talks to take a major financial stake in digital mapping company HERE, acquired last year by German car companies Audi, BMW and Daimler from Finnish communications and IT provider Nokia, two sources in the auto industry told Reuters. Neither Amazon nor the automakers have commented on the report, Reuters added.

• HERE and other mapping services are key to the development and operation of self-driving cars and similar transporation advances, Reuters said. The German auto companies need a cloud-computing service like Amazon Web Services in order to facilitate live updates of traffic and road conditions.

• The investment makes sense for Amazon, which has increased its own network of fulfillment, including various transportation modes like crowd-sourced drivers, its own fleet of trucks, its own leases of cargo planes, and even ocean freight-forwarding shipping in order to control and speed up more of its delivery services.

Dive Insight:

Amazon has been nothing but assertive in its investments in transportation, and an investment like the reported HERE deal makes sense both for its delivery ambitions as well as its lucrative cloud services business.

While some analysts believe that Amazon is on its way to becoming a shipper that could deliver packages for third parties, the e-retail giant also must decrease its ballooning fulfillment costs. Amazon’s delivery costs were up 37% year-over-year in Q4 to $1.8 billion and are growing faster than its revenue, which increased 22% to $35.7 billion in the same period. 

Meanwhile, its Amazon Web Services cloud business is widely seen as a major force driving the company’s fortunes and a clear advantage over retail competitors without such a cushion. AWS Q1 sales increased 69.4% to $2.41 billion, but it was not quite a repeat of its Q3 performance of 78% growth.

"By comparative retail standards, Amazon's level of profitability is still painfully weak," Neil Saunders, head of retail analyst firm Conlumino, who remains positive on Amazon, told Reuters in January. "For every dollar the company takes, it makes just 0.75 of a cent in profit.” 

Nokia completed the $2.8 billion HERE sale in late 2015. It retained possession of the location platform after sellng the rest of its mobile handset business to Microsoft in 2014. Intelligent mapping systems like HERE can supply real-time traffic and road conditions information to help control sensor-equipped self-driving cars, as well as delivering other shareable logistics data.