Hyundai’s Collaboration with Amazon Sparks Optimism and Concern

The recent team-up between Hyundai and Amazon to sell brand-new vehicles through the e-commerce giant’s website has caused a stir in the automotive retail industry. It’s an interesting development that has left many people pondering whether it’s a step in the right direction or a potential problem waiting to unfold.

The system will involve dealerships playing a crucial role in the transaction, with buyers having the option to either pick up their vehicle from the store or schedule a drop-off. This interesting partnership was officially announced during the Los Angeles Auto Show, raising questions about the potential impact on the market.

On one hand, the Hyundai-Amazon collaboration could bring about positive outcomes for consumers who are already familiar with and trust Amazon. It could also give traditional dealers a much-needed boost. However, there is also reason for caution as the industry grapples with the formidable influence of Amazon, which remains the dominant force in U.S. retail, owning a major grocery chain and controlling the majority of book sales in the country.

While the complexity and cost of selling cars are significantly higher than selling books, the transformation of book sales serves as a crucial warning for auto retailers to sit up and take notice.

For some dealers, the partnership presents a promising opportunity, as long as it remains financially viable for them. By enabling customers to shop for a car in the same way they would shop for anything else on Amazon, the agreement opens up a realm of possibilities. However, dealers are equally intent on safeguarding the long-standing retail model that restricts new-vehicle sales to their showrooms.

Leveraging the longstanding protection provided by state franchise laws, dealers are likely to resist Amazon encroaching on new-vehicle sales. Amazon and Hyundai have made it clear that they have no intentions of sidelining dealers, although even if they were to pursue sales without their involvement, they might face significant obstacles.

Several factors, such as the mechanics of financing and trade valuation, remain unknown in this new arrangement. However, the agreement’s implications, including Amazon selling Web services to Hyundai and integrating Amazon Alexa into Hyundai vehicles, present clearer financial prospects.

For many industry observers, Hyundai’s collaboration with Amazon is further evidence of the e-commerce giant’s keen interest in the automotive realm. Amazon is already vending vehicle parts through its platform, has acquired self-driving vehicle company Zoox, and holds the largest stake in electric vehicle startup Rivian.

Amidst these developments, the looming question remains: will Amazon make a significant foray into the auto retail sector, possibly through the purchase of a dealership or a large dealership group, similar to its acquisition of Whole Foods?

For brands and dealers, the path forward is fraught with uncertainties and potential risks, but it is a path they must navigate. With an increasing number of car shoppers seeking a seamless, Amazon-like experience, the possibility of merging Amazon’s platform with operations at local dealerships may hold the key to meeting this evolving consumer demand.