Will Amazon.com (AMZN 1.40%) shoppers soon be able to click "Buy It Now" on a new car? And if so, what does that mean for online car-shopping service TrueCar (TRUE +0.00%)?
The online retail giant isn't quite there, not yet. But Amazon Vehicles, a new-car research portal that was added to Amazon's giant site in 2016, just took a big step in that direction with its first digital new-car showroom -- courtesy of Hyundai (HYMTF +0.00%).
Why Hyundai has a new Amazon "showroom"
Hyundai said its new Amazon showroom will allow shoppers to compare models, read reviews, view the vehicles that local dealers have in inventory, and schedule test drives.
The landing page for Hyundai's new "showroom" on Amazon.com. Image source: Hyundai.
A prospective customer will still have to work with a Hyundai dealer to actually buy a car. The idea behind the Amazon portal is that it will -- hopefully -- generate a flow of new traffic to Hyundai's U.S. dealers, while helping the company stand out from rival automakers in the minds of the Amazon customers who venture into the Amazon Vehicles sub-site.
The idea, said Tim Maxwell, Hyundai's U.S. digital marketing manager, is to give customers a way to research and act on a new-car purchase that is familiar and consistent with the overall Amazon shopping experience.
"This collaboration with Amazon provides customers with the ability to learn about Hyundai vehicles in a way that matches their expectations for nearly every other type of purchase," Maxwell said.
Is Amazon Vehicles now on a collision course with TrueCar?
Slowly but surely, Amazon has been building its Vehicles portal into a serious rival to car-review-and-shopping sites like Edmunds and Autotrader. The site already offers photos, detailed specifications, and customer reviews for just about every vehicle sold in the United States. The only thing that has been missing is a direct way for Amazon customers to purchase a vehicle via the site -- a "buy it now" button for new cars.
Amazon has already tested the car-sales waters, in a small way. It worked with Fiat Chrysler Automobiles (FCAU +0.00%) to offer 3 Fiat models at discounts to its customers in Italy in 2016. But until now, Amazon didn't offer its customers in the U.S. any way to take a direct step toward buying a car.
Hyundai's new showroom changes that, and that makes it a significant step forward. Amazon is now in more or less direct competition with online car-shopping site TrueCar (TRUE +0.00%), at least with customers who want Hyundais.
TrueCar was founded with the goal of taking much of the hassle out of car-buying. The site works by matching serious ("qualified") buyers with nearby dealers that have agreed to honor a no-haggle price.
TrueCar has quite a head start on Amazon: As of the end of the first quarter, it had over 12,000 new-car dealers signed up to take referrals from its service. TrueCar's users purchased about 230,000 vehicles via the service in the first quarter. That's a big number, but it's one that could be dwarfed in a hurry if Amazon got serious about inserting itself into the car-buying process.
Will it? There is some money to be made here. TrueCar collects referral fees from its dealer partners after cars are sold. Those fees averaged $334 per car in the first quarter, generating nearly $77 million in revenue for TrueCar.
One could easily imagine Amazon doing an end run around TrueCar's dealer relationships by reaching out to automakers, offering to send their dealers referrals in exchange for the lowest possible no-haggle price. Dealers might protest that signing up with Amazon could squeeze their already-thin margins -- but in the end, I suspect Amazon's scale and reach would make it very hard for them to refuse.
That wouldn't be great news for those new-car dealers. It would almost certainly be devastating news for TrueCar.
Image source: Hyundai.
What is Amazon's likely play, here?
Given that Amazon Vehicles has been up and running for nearly two years, and this is its first automaker showroom, it's safe to say that the company hasn't exactly rushed into the new-car space. It's clearly toying with the idea of doing so, though.
I suspect Amazon's leadership is very aware that most Americans dislike the experience of buying a new car. There is probably a very big opportunity for the company to insert itself as the middleman in this unpopular process, streamlining it for both buyers and dealers -- and not, incidentally, taking a cut for itself.
If nothing else, the new Hyundai showroom will give Amazon a chance to get answers to some big questions: How much can it ask for such a service, and how much would it cost to provide?
I think if Amazon decides it can earn a decent profit in this space, we'll see more automakers sign up to create virtual showrooms on Amazon's retail platform. If so, that will put TrueCar in a very tough spot. Stay tuned.
