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Amazon and Hyundai launch a broad, strategic partnership—including vehicle sales on Amazon.com in 2024.

New Strategic Partnership

Last month, Amazon announced a New Strategic Partnership with Hyundai.

In 2024, auto dealers for the first time will be able to sell vehicles in Amazon’s U.S. store, and Hyundai will be the first brand available for customers to purchase.

“Hyundai is a very innovative company that shares Amazon’s passion for trying to make customers’ lives better and easier every day,” said Amazon CEO Andy Jassy. “Our broad, strategic partnership should do just that, from changing the ease with which customers can buy vehicles online to making it simple to use Alexa in Hyundai vehicles for entertainment, shopping, smart home adjustments, and calendar checks to enabling Hyundai to transform their customer experiences and business operations by moving to AWS. We look forward to inventing together for many years.”

Can Amazon Successfully Sell Cars?

The Wall Street Journal asks Can Amazon Sell Cars? 

My subtitle added the word “successfully“. Clearly Amazon “can” because it’s going to. Whether or not it will succeed is the real question.

The company is set to face several challenges in expanding the program beyond a pilot phase for employees starting early next year: One is dealerships, which remain at the center of most new-car sales and depend on service revenue for profit incentives. A second will be trying to get customers who visit its website mainly for lower-priced items to turn to the platform for one of the biggest purchases of their lives. Amazon also will have to navigate different government regulations. 

When the new service launches later next year, Amazon said shoppers will be able to complete every step of the car-buying process through its website. Only new Hyundai vehicles will be available at the start. Consumers will have different financing options, but the company said it is still working through details. Eventually, Amazon wants to expand to trade-in vehicles and used cars.

Many dealers might be loath to accept a high volume of online sales because they make a significant amount of money on service and warranty deals that customers agree to when they finance a car purchase. 

Another issue is that Amazon will be trying to get customers to think of its platform for car-buying. The typical transaction on Amazon is under $50, according to a recent survey by Consumer Intelligence Research Partners, which studies Amazon customer habits. Only 11% of customers surveyed reported spending $1,000 or more on a single item. 

“They’re great at getting you to spend $30 or $40, but it’s hard to break through to the bigger stuff,” said Josh Lowitz, co-founder of the research firm. “The bigger stuff is more infrequent, and so it’s more special for the customer.”

The Car Buying Process

Most people hate the car buying process, the negotiations, and being talked into extras they don’t want. Dealers carry huge amounts of inventory and that’s costly.

Also, dealers pay hefty commissions to sales agents and will no longer have to. Some dealers are concerned over service but the cars will still have to be serviced somewhere.

Here’s an amusing snip from the Journal.

Mike Sullivan, who runs a Hyundai dealership in Santa Monica, Calif., that is part of the pilot program, views the Amazon partnership as a positive step. Salespeople at the dealership could make half as much per sale in commission in online sales versus in person, he said, but the upside is the time spent on those sales is expected to be far less. Overall compensation could increase, he said.

Overall compensation to sales agents will drop dramatically. How can it not? Every sale made online is a sale not made in person.

But what else can Sullivan say? “Hey sales force, your commissions are about to shrink,” is not a message Sullivan can deliver successfully.

Eventually, most of the sales force will disappear. The commission model itself is doomed.

Elizabeth Warren Is Sure to Howl

• October 15, 2021: Elizabeth Warren says Amazon is ‘like a monster’ that must be fed every minute
• Reuters: U.S. Senator Warren urges Amazon breakup
• September 29, 2022: Call on FTC to Oppose Amazon’s Proposed $1.65 Billion Acquisition of iRobot
• November 3, 2022: Elizabeth Warren wants to keep Big Tech from taking over your car
• November 30, 2023: Sen. Elizabeth Warren ready for war with Subway

Confused?

You shouldn’t be, because this arrangement is very beneficial to consumers.

But In case you are confused about nearly anything, simply invoke the Warren test.

Warren Test

• If Elizabeth Warren is against something, you should be for it.
• If Elizabeth Warren is for something, you should be against it.

No general rule is infallible because no one is perfectly right or wrong.

However, the rule is an excellent starting point with a high probability of steering someone in the right direction.

Alexa Inside – A Rousing Success

I confidently predict a rousing success. Tesla successfully sells cars directly to consumers. Why can’t Amazon do the same?

Getting rid of the middlemen (sales agents), is a very a good thing. This will take time, and there will be a few kinks, but the process of selling cars is about to change for the better.

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