Amazon’s bet on the future of automotive comes from two angles: one is entirely self-serving around reducing the cost of shipping, and the second is to revolutionize industry models that consumers find outdated and uninspiring.
Amazon does everything within their power to keep their operating costs low. Some speculated that Amazon’s search for HQ2 was a thinly veiled quest for data around city planning — including plans around infrastructure, zoning changes, and new roads — so they would be best informed when building new warehouses and fulfillment centers across the country. And if you haven’t heard, they’re aggressively planning for drone deliveries too.
Another way that they are looking to make shipping less expensive is through investing in self-driving vehicles. Earlier this year Amazon led a $700MM round of funding in Rivian, an electric vehicle startup. The Michigan-based company makes premium electric SUVs and plans to launch into the market this year, with longer-term plans to become the future of self-driving vehicles. If this investment pays out, Amazon can make inroads (no pun intended) into reducing delivery costs while positioning themselves at the forefront of automotive innovation.
But there is another reason why Amazon is motivated to invest in automotive: the entire industry is hungry for innovation and fresh thinking. This makes it a perfect fit for Amazon, a company known for its quest to dominate every vertical.
Although new vehicles still need to be sold through a dealership (for now), there are other pain points that Amazon is working hard to alleviate.
For evidence of this, look no further than Alexa, who was seemingly born to drive. Amazon’s virtual assistant can select and play music, aid with maps and navigation, and alert car owners about upcoming vehicle maintenance or service alerts. A hands-free voice experience is organic and additive, and one could argue that it also makes for a safer, more connected drive.
Hyundai has already jumped on this by integrating Alexa into their owner’s app. With Alexa enablement, drivers can tell the virtual assistant to start their car or set the temperature of the interior from the comfort of their homes. Improvements with Alexa in the automotive space will definitely continue, and manufacturers looking for “innovation by association” are already finding a good partner in Amazon.
Amazon is also leveraging the architecture they’ve created for Prime Now to turn the usual dealer visit on its head. Volkswagen leveraged the “on-demand” capabilities of Prime to bring a test drive directly to consumers within a two-hour window instead of requiring them to go to a dealership to try out the latest car model. Amazon cared for the staffing and training of that test-drive field team, which alleviated the pain for the original equipment manufacturer. This partnership made things easier for the customer which in turn reflects positively on the brand, and it made Amazon a trusted resource for automotive research and shopping.
This brings us to the most controversial element of all: car buying. Nothing strikes fear into the hearts of the legacy dealer model like the potential for Amazon to sell direct. While that won’t happen in the short term, Amazon is laying the groundwork for a future where things could be different.
Accumulating automotive data is foundational to Amazon’s approach, and they’re already sitting on heaps of it derived primarily from two big buckets. The first is sourced from their massive parts and accessories marketplace, where Amazon has a database of over 134MM+ users with specific makes and models connected to their account. Customers willingly add this to their profile; when you’re in the market for windshield wiper blades, you want to be sure they’ll fit. Understanding current car ownership is a critical element for Amazon to eventually upsell and cross-sell new vehicles.
The second data bucket comes from customer visitation to the 700,000+ Amazon Vehicle Detail Pages that meet auto-shopper search demand. We already know that 56% of consumers organically turn to Amazon first for their product searches. Although not as robust as a Kelly Blue Book or Edmunds, the number of people visiting Amazon’s Vehicle Detail Pages will no doubt increase, and the experience will continue to improve.
What happens next with Amazon’s moves into automotive space remains to be seen, but smarter auto manufacturers are already exploring “frienemy” relationships instead of sitting it out on the sidelines. There’s no chance that Amazon is going to retreat from the vertical, so forming alliances now is critical.