Giant Amazon angling for its piece of online auto market
Amazon.com Inc. likely has found a way to beat state dealer franchise laws and sell cars online, I believe.
Dealer franchise laws were set up to protect the investments of generally local auto dealer businesses from the whims of automakers by preventing them and designated retailers from selling their own cars directly to the public. Tesla Inc., for example, has tried bucking the system, but it's slow going.
Franchise laws also have prevented automakers from selling their cars online. One of the arguments is that cars are very complex and expensive machines that need dedicated service centers to keep them running. Dealer franchise laws gave dealers the duty of maintaining cars. Nearly all state franchise rules include things like necessary recall service, keeping parts available for cars that have been discontinued, and getting training from automakers on special technology such as fixing aluminum structures and computer glitch diagnoses.
The downside of this is that independent service centers and chains have traditionally been cut out of doing this work, often at lower prices and in less time. Auto maintenance is largely divided into tires, oil, batteries and wear items like brakes, shocks and joints. And eventually that's all that will need to be maintained underneath electric cars in the future.
“Electric vehicle volume is growing year over year. While projections vary in terms of long-term growth, we do not anticipate an impact on the automotive maintenance industry for the next decade," says Jiffy Lube president Patrick Southwick. "To meet the needs of electric vehicles, we have evolved our service offering to include brakes, tires and ancillary services.”
Jiffy Lube's franchises, sold by Shell Oil and the most prolific of their type in the United States, are famous for starting the non-appointment quick service formula in 1979, freeing motorists from more expensive and time-consuming dealer service.
Retail giant Sears sold its Sears Motor Buggy for $395 from 1908-12, and again sold a rebadged Kaiser sedan from 1952-54. Several years ago the retailer started a plan to bolster its Auto Center service business by offering a much wider range of convenience services at its unique shopping mall locations, so customers could wander or see a movie at a mall while their cars were worked on.
Just two years ago the company, now under federal bankruptcy protection, rolled out plans for selling maintenance subscriptions for used cars, including inspections for folks buying used cars.
The competitiveness of auto maintenance is so fierce that none of these plans was enough to save the company from closing almost half of its 619 auto centers since then, even though its brands like DieHard pioneered the high-power, plastic-cased lead acid battery business in the 1970s.
Sears filed for Chapter 11 on Oct. 15. Still, I think being stranded at a theater or restaurant in a mall while waiting for maintenance is better than most service center waiting rooms.
Former Sears Auto Center president Brian Kaner told us two years ago that the company made “a sizable investment in technology” to support its new maintenance and evaluation plans. “We have transitioned it into a friendly, productive, clean environment. The days of measuring the amount of effectiveness by the amount of grease on the floor are behind us.”
Alas, Kaner left a year ago for Icahn Automotive Group, which runs Pep Boys, Precision Tune and AAMCO auto service chains.
Now Amazon is taking a shot at auto service, partnering with remaining Sears stores and a chain of 10 brands totaling almost 1,200 service centers and owned by Monro Inc. in Rochester, N.Y., to install tires sold online through Amazon. Tires make up the bulk of the maintenance items motorists purchase every year — 200 million of them.
It's highly likely that more auto parts could be sold by the online retail giant, adding to the competitive nature of wear items. And once Amazon starts selling all the parts of a car, plus service, it's a potential route to selling whole cars, I believe.
Amazon in 2016 started its “Vehicles” website to get its customers used to buying car parts online, as well as testing a program in Southern California for its customers to order a test drive of new Hyundais.
“Our goal is to support customers during one of the most important, research-intensive purchases in their lives by helping them make informed decisions every step of the way,” said Adam Goetsch, Amazon.com automotive director.
I'm kind of rooting for Amazon to sell cars online, even though the company is frighteningly oligarchical to me. My biggest complaint about dealer franchise laws is that dealers end up choosing what equipment cars should have, not car buyers. And that's opened the door to the overselling of so-called “automated driver assistance systems,” or ADAS, that distract and inundate drivers of new cars these days.