Driving into the Future: Amazon’s Car Sales Revolution by 2025

Online car sales, though a small fraction of the market, witnessed a significant surge during the pandemic, challenging the notion that customers would shy away from such substantial online purchases.

In a bold move, Amazon, originally envisioned as the “everything store,” is set to reshape the online shopping landscape by introducing cars to its extensive product lineup. Starting next year, U.S. buyers will have the convenience of browsing and purchasing vehicles directly from dealers on Amazon. This strategic expansion aims to revolutionize the way customers buy cars online, offering a seamless and integrated experience.

The announcement, coming directly from the top echelons of Amazon, underscores the company’s commitment to “changing the ease with which customers can buy vehicles online.” While the selection will initially be confined to the Hyundai brand, this move is poised to have ripple effects in an industry that has traditionally relied on in-person transactions.

Online car sales, though a small fraction of the market, witnessed a significant surge during the pandemic, challenging the notion that customers would shy away from such substantial online purchases. Industry forecasters anticipate a substantial growth trajectory for online car sales in the coming years.

Alan Haig, President of Haig Partnership, a firm specializing in advising on car dealer mergers and acquisitions, notes the evolving consumer trust in online platforms. He suggests that a growing segment of the population prefers the convenience of making significant purchases without human interaction. The involvement of Amazon, a colossal brand in the online shopping realm, adds a transcendent dimension to this announcement.

“It’s no longer a new app that somebody would have to load…it’s sitting on their phone already,” Haig emphasizes, highlighting the seamless integration of Amazon into users’ daily lives.

Amazon’s foray into online car buying dates back more than two decades when it initially invested in an online automotive site. A few years ago, it took a step further by launching an “online showroom” in collaboration with Hyundai. However, until now, the final transaction occurred off-site at a physical dealership.

As part of this groundbreaking deal, Amazon’s virtual assistant Alexa is set to be integrated into new cars from 2025 onwards. This move aligns with the broader trend of smart connectivity and underscores the deepening collaboration between technology and automotive industries. Additionally, Hyundai has inked a multi-year deal for Amazon’s cloud services, solidifying the partnership’s technological dimension.

Hyundai Motor Co. President Jaehoon (Jay) Chang expressed optimism about working with Amazon, stating that it would help the company “grow our sales network, transition to electrification and realize the future of smart mobility.”

Despite the significant leap forward, some details of the partnership remain undisclosed. Amazon did not provide specific information about the number of participating dealers or the structure of their relationship with dealerships. Shopping for cars on Amazon is anticipated to commence in the latter part of 2024.

Amazon envisions a user-friendly experience where customers can search for available vehicles based on preferences such as model, trim, colour and features. Once a choice is made, customers can complete the entire transaction online, including payment and financing options. This approach is designed to offer convenience to customers while providing dealers with an additional channel to showcase their inventory.

While dealers may express some caution, concerned about the potential impact on their business and the relationship with customers, there’s recognition that partnering with Amazon could streamline the sales process. Dealers might benefit from the ease Amazon brings to transactions, potentially increasing sales frequency and reducing advertising costs.

“There’s going to have to be a balance established where all parties would benefit,” notes Mr. Haig.

Interestingly, the stock prices of prominent online car sellers dipped following the announcement, with Carvana ending the day down more than 5%. This reaction underscores the market’s acknowledgement of the transformative potential of Amazon’s entry into the online car sales arena.

Amazon’s decision to include cars in its extensive array of products marks a significant evolution in online retail. As the retail giant extends its reach into the automotive sector, the industry braces for transformative changes in the way cars are bought and sold. The move not only reflects Amazon’s commitment to innovation but also signals a broader shift in consumer behaviour towards embracing online platforms for substantial purchases. As the virtual shelves of Amazon prepare to host vehicles, the future of online car buying seems poised for an Amazonian makeover.