In a strategic move to maintain its dominance in the e-commerce sector, Amazon is set to place its next bet on car sales. Reports indicate that Amazon and Hyundai Motor Company have recently agreed to initiate an online car-selling service, with sales of Hyundai cars on Amazon's website starting next year.
Amazon has stated that by next year, consumers will be able to search for available cars at local dealerships by model, color, and features on its platform. They'll then be able to choose their payment method and financing options online, facilitating either self-pickup or delivery of the vehicle. Amazon executives aim to simplify the car-buying process through their site, making it as easy as purchasing everyday items.
The company plans to start a pilot for online car purchases with employees early next year before expanding its scope. By the end of 2024, Amazon anticipates an increase in automakers selling through its channel. However, the venture isn't without its challenges: traditional dealerships remain central to most new car sales, and Amazon's customer base is not accustomed to purchasing high-value items on its platform. Additionally, the company must navigate various local government regulations.
As Amazon prepares to launch this new service later next year, customers will be able to complete the entire car-buying process through its website, including various financing options. The company hopes to expand its services to include trade-ins and used cars. However, many traditional car dealerships might resist the shift to online sales due to the substantial profits earned from in-person services and warranty agreements.
Moreover, Amazon will need to attract customers intending to purchase cars to prioritize its platform. Research indicates that most transactions on Amazon are below $50, with only 11% of customers spending at least $1,000 on a single item. Josh Lowitz, co-founder of Consumer Intelligence Research Partners, noted Amazon's challenge in breaking into the big-ticket item market.
Legal risks also loom as almost all U.S. states require cars to be sold through franchised dealerships to prevent manufacturers from selling directly to consumers at lower prices. Chris Sutton, Vice President at J.D. Power, mentioned that even if Amazon's customers are ready for online car purchases, signing new automakers will be complex, dependent on the success of the partnership with Hyundai.
Amazon's journey into the automotive sector spans years, with various initiatives including linking to an online car retailer in 2000, operating an online auto parts store from 2006, and launching a car research tool a decade later. The company's collaboration with Hyundai began in 2021 with the creation of an online showroom, and it's expected to integrate Amazon's Alexa technology into Hyundai vehicles from 2025 onwards.
Online car buying is becoming increasingly popular, especially among electric vehicle buyers. Studies show a higher satisfaction rate among customers who can complete most of the car-buying process online. Leaders in the electric vehicle market, like Tesla, Rivian, and Lucid, have adopted direct-to-consumer sales models, reducing reliance on traditional dealerships. Even established automakers like Ford are recognizing the cost savings and customer flexibility benefits of online sales, planning to offer more flexible online purchasing services for electric vehicle customers starting next year.
The collaboration between Hyundai and Amazon represents both companies' adaptation to the new era, highlighting online car buying as a way to create pathways for dealerships, increase product visibility, and provide convenient purchasing options for customers.
