In a significant shift within the automotive sales landscape, Amazon’s recent foray into car sales through partnerships is raising concerns among traditional auto dealers. Earlier this year, Amazon made the big splash by announcing its entry into the market. To place more emphasis on their auto division, they joined forces with Hyundai dealers. We’re excited that this bold move has made it so far! Today, that looks like a new partnership with Hertz, one of the nation’s largest rental car companies.
The Hertz-Amazon deal supercharges rental car companies. Now, they have the opportunity to sell their used vehicles directly to consumers using the Amazon Autos platform. This unique collaboration significantly increases buyers’ access to convenience. It may pose an existential risk to auto dealerships, which rely on a business model centered on reselling vehicles. American car dealerships are an incredibly powerful, entrenched, and well-connected industry with a proven track record selling a couple hundred thousand cars a year. This volume creates huge amounts of profit, feeding billions of dollars in resale inventory.
The implications of this partnership are profound. If Hertz uses Amazon Autos to sell off used cars, it might cut into a longstanding and lucrative dealerships’ revenue stream. One man who was much more worried about this new competition from the future was John Possumato, the former Chrysler Plymouth dealer-turned entrepreneur.
“You have Amazon, the biggest merchandizer retailer in the country, and you’ve got the biggest or one of the biggest rental fleets, and they’re pairing together to sell these cars,” – John Possumato
This increasing move towards direct sales isn’t just coming from the recent Hertz-Amazon partnership. Tesla, Lucid, and Rivian have had their way with the automotive market. They sell directly to consumers, through their own branded showrooms, bypassing existing dealerships. This new model shakes up the status quo of traditional auto sales. It also leads us to query the long-term viability of the traditional dealership model.
Chris Woronka, an industry analyst with Deutsche Bank, focused on the importance of resale in the auto industry. He added that Hertz and Amazon’s deal has potential to disrupt outdated models. It shines a light on an important corner of the industry.
“It’s an important part of the business, right?” – Chris Woronka
U.S. law continues to provide auto dealers a tollbooth monopoly on new car sales. These laws prevent certain misleading practices by direct sellers. Amazon is deepening its own consumer-facing automotive play, as Hertz is using its enormous rental fleet to supercharge direct-to-consumer sales. Now dealers are caught between a rock and a hard place.
Steve Greenfield, an industry expert, correctly noted that Amazon has been trying to get a toehold in automotive retail for quite some time now.
“Amazon, ironically enough, has been trying for 15 or 20 years to get into the automotive retail segment,” – Steve Greenfield
The combination of Amazon’s extensive reach and Hertz’s established rental network could reshape how consumers approach car buying in the future. With this partnership in place, traditional dealerships face mounting pressure to adapt their business models to retain relevance in a rapidly changing marketplace.
This partnership does so much more than increase sales numbers. Alongside these conveniences, it radically changes how dealerships can reach customers and manage their inventories. Consumer preferences are rapidly changing in favor of convenience and accessibility, all things that marketplaces such as Amazon Autos can provide. In order to stay competitive, dealers need to rethink their approaches.