Amazon wants to sell cars, ‘not existential risk yet,’ says BofA

BofA notes that at the LA Auto Show, Hyundai (HYMTF) announced a first of its kind strategic partnership with online retail leader Amazon (AMZN). The main function of the agreement is that it will allow customers to search for available dealer inventory in their area based on a range of preferences directly on the Amazon platform. The customer will then be able to purchase the vehicle and select financing options on Amazon. This partnership so far appears to be an enhanced lead generation tool that is additive to the dealer’s offerings. The public dealer group stocks reacted rather negatively to the news. In BofA’s view, this partnership is “not the existential threat that many fear.” The firm sees potential for this partnership to augment the business of well-run, large dealership groups as they utilize Amazon’s technology to enhance the customer relationship while remaining the linchpin of the vehicle transaction. BofA also sees this as another potential driver of the consolidation of the U.S. dealer base, which has accelerated over the last few years. The firm reiterates Buy ratings on Asbury Automotive (ABG), AutoNation (AN), Group 1 Automotive (GPI), Lithia & Driveway (LAD) and Penske Automotive (PAG).