Amazon car-buying seeks to reshape dealerships

The total addressable market for new and used car sales in the U.S. is estimated to be somewhere between $2.5 trillion and $3 trillion, according to the National Automobile Dealers Association.

And e-commerce behemoth Amazon is attempting to do what insiders say no one has been able to do yet: bring a seamless online shopping experience to a complex and highly regulated industry.

Last month, the company officially began its pilot program to allow a small number of Hyundai dealers to sell vehicles through the Amazon platform to employees only. The pilot is like others Amazon has undertaken before in the travel, grocery and health-care sectors.

Automobiles are one of the products that are most requested among Amazon’s 150 million or so Prime customers, said Jeff Dyke, president of Sonic Automotive, one of the largest publicly traded dealership groups in the country.

About 25% to 30% of car buyers want to do some or all of the car-buying process online, according to Chris Sutton, who is vice president for automotive retail at J.D. Power. When you get to the small but growing segment of electric vehicle buyers, that number jumps to 40%.

A tiny share of carmakers, primarily EV companies like Tesla and Rivian, bypass dealerships entirely and sell new vehicles through their websites. Companies like Carvana have brought used car sales totally online. But online buying still makes up a small portion of overall sales.

And most of the new car market, made up of franchised dealers protected by tough state vehicle sales laws, hasn’t been able to mimic the click-and-buy purchase process consumers are increasingly able to get everywhere else.

So far, Amazon’s program is small, but dealers are watching. Some are skeptical that Amazon will be able to overcome the challenges that have stymied other companies.

Dyke said concerns that the program will threaten the future of franchised dealerships are “preposterous,” though understandable.

“Amazon, I think, brings a level of sophistication, a level of technology, a level of strength in terms of headcount that they’ve got working on this project, that’s unlike any that I’ve seen,” he said.

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