Hyundai's partnership with Amazon to sell new vehicles through its website is a big development in the evolution of auto retail. Whether it is progress or a problem remains to be seen.
Dealerships will be a key part of the transaction. Buyers will pick up their vehicle from the store or schedule a drop-off.
The Hyundai-Amazon arrangement, announced at the Los Angeles Auto Show this month, could be positive for consumers who already know and trust Amazon. It could give dealers a lift, too. But the industry should be wary of Amazon's reach. The conglomerate is the clear leader in overall U.S. retail sales, owns a major grocery chain and dominates most book sales. Amazon controls up to 80 percent of all book distribution in the U.S., according to WordsRated, a research and analytics group for the publishing industry.
Even though selling cars is much more complicated and costly than selling books, the transformation of book sales serves as a cautionary tale for auto retailers.
Some dealers see an opportunity in the partnership, as long as they remain profitable. The agreement will allow customers to shop for a car the same way they shop for everything else.
But dealers also fiercely guard the long-standing retail model that limits new-vehicle sales to their showrooms.
The entrenched position of dealers, who are protected by state franchise laws, will likely prevent Amazon from encroaching on new-vehicle sales. Amazon and Hyundai say they have no interest in cutting out dealers, but even if they were compelled to sell cars without them, they may not be able to.
There are still many unknowns, such as how financing and valuing trades will work.
Two other aspects of the agreement — Amazon selling Web services to Hyundai and adding Amazon Alexa to Hyundai vehicles — have a clearer financial upside.
The Hyundai partnership is the latest sign of Amazon's interest in the automotive world. It already sells parts through its platform, owns self-driving vehicle company Zoox and is the biggest shareholder in electric vehicle startup Rivian.
Will auto retail be Amazon's next big bet? Will it buy a dealership or a large group, as it did with Whole Foods?
Brands and dealers should proceed with caution. But proceed they must. A growing number of car shoppers want an Amazon-like experience. Perhaps the best way to give them that is to combine Amazon with local dealerships.