The arrival of Amazon into any sector is enough to cause jitters among the companies that have traditionally dominated it.
The US technology group has upended the business models of booksellers, publishers, record shops and swaths of the traditional high street as it has expanded, while its move on Friday to buy Whole Foods for $13.7bn sent shares of rival grocers’ tumbling.
Now the company is weighing options for an expanded push into the automotive sector in Europe.
In November, the company began acting as a portal for carmker Fiat in Italy, presenting the 500, 500L and Panda models online and acting as funnel for consumers to established dealerships. Each time, Amazon collects a small fee.
The arrangement remains a test phase for both parties, and has been extended until the end of 2017. The company has a similar plan operating in France with Seat.
Amazon intends to expand the scheme into another major European market, possibly the UK, from next year, according to two people familiar with the plans. It has quietly been building a team based in Luxembourg to spearhead its efforts.
In March, the company poached Christoph Möller, former automotive partner at consultancy Oliver Wyman, to become head of relations with carmakers in Europe.
His arrival comes after the company in November appointed Raoul Heinz, a senior executive at the technology company who previously ran its Europe-wide business to business unit, to head up its EU Automotive division. A month later, it moved Matt Nuffort, a senior product manager, to the role of Head of Vehicles for the EU.
Amazon declined to comment.
Car industry leaders do not discount a full-throated entry by the company into direct sales. “We all believe it will only be a matter of time until they do something serious,” says a senior executive at a European mass market carmaker. Once that happens, working with Amazon will be “something we have to consider” they say.
Gianluca Italia, head of the Italian market for Fiat Chrysler, who oversees the current relationship with the retailing giant in the country, said the Seattle-based group is a long way from mounting a credible challenge.
“I don’t think we will ever rely on Amazon,” he says. “For us, Amazon is an additional sales channel. Nothing more.” He admits that Amazon might one day sell cars directly to consumers but adds “there are many barriers”.
These include overcoming basic physical constraints around buying a car — such as a test drive or part-exchanging an old model — as well as Amazon receiving regulatory clearance to sell a vehicle outside of an established dealer network, and getting approval to provide financing for car loans, an essential part of any car sales process.
Despite consumers increasingly using the internet for research, many still want to see and drive the car before purchasing it.
James Hind, founder of Carwow, a website that matches consumers with dealers selling the specific model they want, says that almost all motorists using it still go for a test drive at a dealership before buying their car.
“People want to interact with the dealer,” he says. “Because it’s such a vast quantity of money there’s an element of trust. You can’t gamble with £30,000.”
There remains nervousness among investors, however.
Following a report in German publication Automobilwoche earlier this month saying Amazon was preparing to sell cars in Europe, shares in some dealer companies as well as Auto Trader, the UK online car marketplace, fell sharply, amid concerns that they may be left blinking in the headlights of the US behemoth.
Auto Trader saw its shares fall as much as 6 per cent the day after the report, while shares in Lookers, the UK’s largest dealership, briefly fell as much as 4 per cent.
“I don’t want to come across as a luddite, but we don’t feel particularly threatened by this,” says Andy Bruce, chief executive of Lookers.
“There’s no doubt that consumers want to do more online but ultimately, everything has to go through a dealer because the only way that car manufacturers can distribute cars.”
Any move towards direct sales, bypassing the dealerships and going straight to the consumer such as the approach being taken by Tesla, the US electric carmaker, would be riskier for Amazon.
The automotive roadside is littered with brands that have tried and failed to enter the car sales market.
Virgin Cars, launched by Sir Richard Branson, closed in 2005 five years after it was started.
In 2011, Tesco embarked on a foray into the industry that was even shorter, withdrawing from the market after just a year.
“It might not sound complicated to people but selling cars is an art,” says Mike Allen, lead analyst who covers the motor dealerships at Zeus Capital. “A lot of bigger names have tried to come in and failed.”
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