Amazon, Hyundai partnership causing concern among dealers, survey says

U.S. dealers have mixed feelings about how the partnership between Hyundai Motor and Amazon will affect the car-buying experience and whether it will move the industry toward a more Tesla-like sales model.

More than half of the auto retailers who expressed their opinions in an Automotive News survey view the plan negatively.

Last November, Hyundai and Amazon announced plans to collaborate on an online vehicle retailing program that will allow shoppers to complete end-to-end car-buying transactions on Amazon by the end of 2024.

Amazon also said it intends to extend the Hyundai car-buying process to other brands. The retail giant said its goal is to transform the process into a click-to-buy shopping experience, eliminating the complexities and long hours involved in traditional car buying.

Amazon has not disclosed how it will monetize car sales.

The Amazon-Hyundai plan has left many retailers at multiple brands doubtful of the concept, according to the results from Automotive News' 2024 Dealer Outlook Survey.

Though the survey is not scientific, the attitudes captured provide a snapshot of what dealers think of a proposal that could alter established retail practices.

All but a handful of dealers told Automotive News that the Amazon plan is certain to impact the way car sales are executed in the industry.

Many dealers said they believe what Hyundai and Amazon are co-developing will lead to more of a direct-to-consumer sales model. Other respondents said the program will not be good for long-term customer service and will likely put pressure on dealer profit margins.

Some dealers said the online process will cut into store income from finance and insurance business and customer trade-ins.

The survey, conducted in January, gathered feedback on a variety of topics from 208 dealers and dealership managers representing multiple brands. Of those, 135 specifically addressed the Amazon endeavor. Participants were given the option to answer questions anonymously.

More than half of respondents predicted that the Hyundai and Amazon partnership will be the first step in eliminating dealers and pushing the industry toward a factory-direct sales model used by electric vehicle startups Tesla, Rivian and Lucid.

Those online car-buying processes have made a growing number of consumers more comfortable with the idea of making complex purchases online. Used-car retailer Carvana also offers consumers an online buying experience.

Hyundai has assured its 841 U.S. dealers that they will remain an integral part of the process. A subcommittee of Hyundai's national dealer council is now working with the National Automobile Dealers Association on an agreement that will govern the relationship and protect the franchise system.

Andy Wright, the chairman of the Hyundai National Dealer Council and the head of the subcommittee, told Automotive News that “talks with Amazon have been extremely collaborative and productive.

Wright is the managing partner of Vinart Dealerships, which operates a Honda, Acura, Mercedes-Benz, Porsche and Hyundai store in  eastern Pennsylvania. He said he is “excited at the prospect of Hyundai having a leadership position in this endeavor" and urged the dealer community to be patient and avoid jumping to conclusions about the partnership.

“We still have much work to do with Amazon to get this process to a point where all parties are satisfied, but things are progressing efficiently” he said.

Amazon and Hyundai are testing the model using 18 dealers in major markets including Los Angeles, Atlanta, Seattle, New York and Denver. Amazon is using its own employees as beta site guinea pigs. This month, the automaker said it made its first sale on the retail platform, a 2024 Hyundai Santa Fe, to a Seattle-based Amazon worker. Hyundai did not provide more details, other than that initial customer feedback on the process was positive.

Some dealers asserted in the survey that they play a crucial role both before and after a vehicle purchase, and that customer loyalty will not exist without the conversations that occur during a sale.

More than half said they have unanswered questions about what an Amazon vehicle sales model will do to the long-term customer relationship dealers try to maintain after a sale is complete.

One dealer said that while the concept of the sales model could prove popular among car shoppers, overall customer service will suffer.

Some respondents expressed concern that online sales might cut into different dealership profit centers, such as F&I and trade-ins.

Amazon will use Hyundai Capital for financing, which could help consumers find competitive offers and incentives meant for new or returning customers, or on certain vehicles. Amazon will likely bring in other lenders as the program expands.

Some retailers said trading in a car in an online sales environment will cut into dealership profit opportunity. A trade is a key piece of new-vehicle retailing because it enables buyers to sell their older vehicles to reduce their new monthly payments.

Industry insiders have said that used-car appraisals are something of an art, and this part of the process could be a challenge because the dealer taking the older vehicle will need to agree with its assigned value.

Amazon has acknowledged that the trade-in process is still under development.

Some survey respondents said they are not concerned about the Amazon-Hyundai relationship at all. Two dealers dismissed the partnership as a "gimmick" or a public relations stunt. One respondent predicted the process will simply fail.

"Purchasing a vehicle is not like purchasing a household good," one participant wrote. "You can't take your vehicle to Kohl's and send it back to Amazon if you don't like it."

One dealer also wondered whether the automaker-retailer partnership violates antitrust or monopoly laws.