Following Amazon’s announcement, shares of these local car dealerships dropped by as much as 8% on Thursday, while Amazon’s shares experienced a minor decline of approximately 0.5% during the trading session.
Local car dealerships like Carmax, Autonation, and Carvana face a surge in competition as Amazon declared its plans to initiate online vehicle sales next year, marking a significant shift in the automotive retail landscape
Amazon‘s initial partnership in this venture will be with Hyundai, targeting the sale of the automaker’s new vehicle lineup. This move represents Amazon’s inaugural step into the realm of vehicle sales. Hyundai’s American depositary receipts observed a modest uptick of around 3% on Thursday, although trading volume remained notably low at under 2,000 shares.
The tech giant, in a press release, highlighted its forthcoming “digital shopping experience,” emphasizing the ease for customers to purchase a new car online and subsequently arrange for pickup or delivery by their local car dealership, emphasizing convenience.
Under this arrangement, Amazon will oversee and fulfill car sales on its platform through these local car dealerships, assuming the role of an intermediary between customers and these establishments. This approach contrasts sharply with the traditional ownership model of companies like Carvana and Carmax, where they typically possess the vehicles they sell.
Amazon’s bold move echoes its previous disruptions in various industries through seemingly straightforward announcements
Past instances include its entry into auto parts retail in 2017, which shook the industry, as well as its ventures into health insurance in early 2018 and the announcement of launching physical pharmacies in May 2021, impacting insurance and pharmacy stocks significantly.
The collaboration between Hyundai and Amazon extends beyond car sales. Other facets of the agreement encompass Hyundai’s adoption of Amazon Web Services as its primary cloud provider and the integration of Alexa into Hyundai’s car models, scheduled to commence in 2025.