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.
The best thing about the Warren Test is how often you get to use it. Some people are wrong about most things but in general don’t say much. Warren has an opinion about damn near everything and expresses it.
Another fine thing is she is frequently an early warning indicator. For, example, she was Lizzy on the spot in 2022 stating “The senator is asking the FTC and the DOJ to watch out for Amazon’s, Apple’s, and Google’s moves into your dashboard.”
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.
Cheers to Amazon and Hyundai.
What’s the Case for and Against a Japanese Company Buying US Steel?
Meanwhile, in case you missed it please consider The Case for and Against a Japanese Company Buying US Steel
I looked for Warren’s position, but she hasn’t stated one yet.
Trump has an enormous advantage because Biden has to commit first. See the above link for discussion.
The Inverse Warren Rule sounds like the Inverse Cramer ETF.
Does it come shipped in a huge Amazon box?
???
The only product that Amazon “succeeds at selling” is AWS.
Every other retail product that Amazon sells is a net loss/loser.
Amazon’s ‘retail dominance’ is a mirage.
they do sell a lot of made-up Chinese brands, as big brands have pulled out to retain customer data.
AWS is the moneymaker, Amazon’s delivery function and basic market platform notsomuch. Even if the corporation isn’t turning a profit off their retail website, it is still a force. I would agree that ‘retail success’ is a mirage.
We haven’t gone into a dealership to buy a vehicle in over 15 years. We do internet sales. Pick out the EXACT vehicle with the EXACT features you want. Ask for EXACT fees/cost (tax, title, doc fee, etc.) Open a junk email account and then request internet pricing from your local dealers. We save $$$$$$ and there is no haggling. You know what your car is going to cost out the door. We have excellent credit so we know we’ll be getting the best financing rate. We put the money in CD’s making higher interest than the loan. If rates are too high then we’ll pay cash.
good idea about a “burner” email account for the tsunami of non-responsive emails from dealers after a contact. I found it was easier doing internet car shopping 10-15 years ago, now they seem to have “dumbed down” the available precise pricing info.
This is the time of year when dealers & salespeople are desperate to book sales for monthly, quarterly & annual incentives. Maybe I’ll do a couple test drives just to tease them.
With low gas prices tough to see fuel economy and EVs, easy to sell gas hog big trucks & SUVs
Mish, I can’t help but think your animosity against Warren is due to her American Indian heritage. Shame on you! 🙄
Indeed.
Her 0.1% native American heritage (or whatever it is) signals me out. You caught it.
it’s her 5% troglodyte genes that are the problem.
If dealers don’t geographically restrict sales then they can kiss service income on the cars goodby. If dealers participating aren’t willing to compete on price & volume then this will just preserve, maybe add to the transaction costs. If a couple big or innovative dealers don’t aggressively jump in this will just be a big nothingburger!
How are trade-in’s going to be handled? I have not dug into that part but if someone has, let us know how that will go. Normally, a Used Car Manager has to take a peek at the Trade-in for flaws, condition, etc. Will Amazon send a Flat-bed trailer to deliver the new Vehicle and fetch the trade-in?
Trade-In’s Hmm… The more unanswered questions We Have, but not them, the more I am thinking the following:
The Government/EV Manufacturers (all the same now) have ALL the answers, to all the questions, but are Only Telling Us the answers to the questions that they wish for us to have at the moment.
– Batteries > When will the U.S. have its own Source and Access to Produce EV Batteries, so We/Americans, are In Control of the Energy Source Required to power Our EV’s? CRICKETS!
– Trade-In’s > How will the U.S. handle EV trade-in’s? Are Laws Written and In Place? Are U.S. EV Consumers Protected from battery issues, and by whom? Taxpayers? What about disposal and Penalties for non-compliance with… What Exactly? CRICKETS!
– Environmental Concerns > Does the U.S. have Actual Laws In Place to handle the EV’s and There Parts? Where are the Millions upon Millions of Environmentally Unfriendly Old, Used, Leaking, Batteries/Materials going to go and be stored for the next Millennium? Who’s is Responsible for the waste contamination, if there is any? Taxpayers? Car Manufacturers? Owner of the Storage Company and/or Storage Containers? Politic er.. already know that one! CRICKETS!
– When Will the Country have 80% Infrastructure Coverage for Battery Charging, Disposal and Purchase? CRICKETS!
And the List goes on… LadadadaDa!
If you like asbestos and buried oil tank disposal you’ll love big battery disposal. Tesla will have you coming & going with the battery swap.
Exactly what I am afraid of! Places like China for example, where we were sending waste to. Not so much anymore. Elsewhere? Maybe catching on, so what are we to do with this crap?
Building Crap, and getting rid of Crap, is getting more and more expensive, and with less, and less options available. When, not if, we take over and build more of it out of necessity, keep and dispose of it Locally, because you’re out of options due to cost.
Does it ALL end up where it supposed to? Sent there when it was supposed to be? Professionally and Properly Environmentally Cleaned and packaged for Storage? Hmm…
Haiti, we can always dump on Haiti
We could just stop building the crap…
There won’t be trade-in’s. Sell your used car yourself.
AMZN isn’t in business to sell used cars. AMZN might sell Tucson SEL for $23,987, Elantra for $18,979, to be picked and serviced by the local dealers. They can make money on small margins and large quantities. Hyundai will keep its workforce happy. Build a firewall against Toyota Corolla. Dealers turnover and service will be secured during the lean times. They will make money on used cars. Hyundai & Kia might rise to number #3 spot in sales after GM and Toyota, ahead of Ford and Stella.
Merry Christmas to you Mish. Not sure where to post this but I have been following you since around 2005. I am very grateful for your daily take on global economics. One of the most difficult things to understand. Thanks for trying to make sense out of this goofy manipulated nonsense.
Sincerely,
Babelthuap
FYI Babelthuap is an island I passed by stationed on the USS Lincoln. I always wondered what was it like on that Island. Who lived there? What do they do? Many videos about it now. Not the case in the early 90’s.
I agree, as Mish’s work is ALWAYS my first stop. He causes me to ponder things that I never thought about or needed a viewpoint on. His work is Great and Merry Christmas to Mish and everyone else here. And, if I have offended anyone, it is due to my amped up Passionate hatred for Politics. Otherwise, I live an easy life of full-time Travel and leisure. We own a Diesel Pusher (Prevost Marathon Conversion) with a tow car and live half time in Portugal (Magical Country)….we are European Blooded Americans.
Mish you a Merry Christmas little buddy!
Thanks
Back at ya.
Mish, Merry Christmas and a Happy Healthy New Year!
In 1995 I purchased a vehicle online using an internet service called autobytel. It was a two year lease. They arranged for a local dealership to drive the new vehicle to my home, and drive away with my other leased vehicle, whose lease was ending. I signed the papers at my home. I wrote them a check for $5000. All in. All taxes, fees etc. The new vehicle was listed at $35k. I figured that $5000 didn’t even cover the first year’s depreciation. The dealer said they were willing to take a loss on the vehicle to get in on the ground floor of this new way to sell cars. I took advantage of the offer. Two years later, I hoped to repeat the process, but the price had gone up to what you would expect. I guess they weren’t willing to take a loss anymore. So I didn’t mind going into the dealership and buying in a more traditional way.
Other online services are now available such as Carvana, Vroom, Cargurus etc
None of them has managed to make a big change in how most people buy vehicles.
Perhaps Amazon will change that. It certainly has changed the way that I buy many things now.
Yes, Papa, I found your comments really interesting. One way that we have overcome the Sales Process in dealers is to Show up with an offer, “take it or leave it” – – and “You have 20 minutes to decide.”
At 21 mins, we would leave.
Eventually, a dealer would be ready to deal. We timed our arrival at these dealers at the moment each month when sales Goals MATTERED and our incremental purchase MEANT more.
In 2022, we bought a Landmark 42 Foot 5th wheel RV as a parked only RV in Oregon (we are here part time)…and we gave two dealers our bottom line on the VERY SAME MODEL, SAME equipment and one bit and the other lost out.
We told BOTH dealers we had the same model lined up “somewhere else – – that is our business, not yours” – and the trick is to know how much they might accept, based upon averages (Dealer cost, etc. –OR, used Vehicle values but discounted.
We also always wait for “seasonality” influences, particularly pronounced at RV dealers.
Tesla changed and the rest of the industry will follow
When I think of online car sales, Carvana comes to mind. They filed bankruptcy. Amazon must have studied their business model to learn why it failed and then fixed the problems.
Yes, clearly Amazon is pretty sharp. I do not buy many mainstream items on Amazon any more because they abandoned their low-competitive-price model and Walmart is nearly ALWAYS 10% cheap AND if I buy on line, my local Walmart store will accept the return within a time frame, no questions asked. Amazon is no longer our go-to retailer.
It all depends on the discount below dealer cost.
Yep and knowing that number and remaining COMPLETELY and UTTERLY unemotional about a particular model is SO key to getting a killer deal.
Also, seasonality matters. KNOW when dealers need to dump inventory.