Amazon Expands Autos Business: Time to Sell These 2 Stocks Now?

It's common knowledge that the car-buying process is unpopular. When the option to complete a substantial part of the buying process online, or all of it, became available, investors were initially skeptical. The question came back to: "Would consumers really buy a vehicle without test drives and other in-person aspects?"

The answer is a much clearer "yes" today, and according to Allied Market Research, online car buying is expected to triple by the end of this decade. Amazon (NASDAQ: AMZN) hopes to tap into that growth, and its Autos segment is expanding rapidly from a niche pilot to a broad vehicle marketplace.

News of this nature could have widespread implications for some, seriously threatening numerous auto-related companies.

Image source: Getty Images.

What Amazon Autos is, and isn't

Investors can't be blamed for assuming that Amazon could disrupt the automotive marketplace entirely, but that's not what it looks like yet. Amazon Autos is initially designed to work with dealerships to help broaden their reach, connect to consumers where they shop for day-to-day purchases online, shorten the sales cycle, and improve efficiency.

Dealers remain in control of the transaction, set their vehicle pricing, and own the service protection products and financing options. Essentially, Amazon Autos gives dealerships a better ability to create an online presence at a time when they're competing with established online retailers such as Carvana (NYSE: CVNA).

Speaking of Carvana, investors of the online used-car retailer can mostly sleep soundly at night. While Amazon could offer consumers a new way to shop for vehicle listings online, the customers are still somewhat limited in their access to inventory. Amazon isn't replicating Carvana's ability to distribute sold vehicles across the U.S. -- at least not yet. That means Carvana's durable advantages of nationwide inventory and distribution still offer immense value to consumers.

However, Amazon Autos is poised to disrupt public companies that focus on vehicle listings and dealership leads, such as Cars.com (NYSE: CARS), CarGurus (NASDAQ: CARG), and privately held TrueCar. Citi analyst Ronald Josey noted, "With Amazon increasingly working with dealers directly, we are watching for traffic pressures to CarGurus over time."

While Cars.com and CarGurus have done a respectable job building their brands and reach, the simple truth is that Amazon already has a massive cache as a retailer of anything and a consumer reach that would be difficult for either of the auto listing companies to match. What Cars.com and CarGurus have going for them is that dealer adoption could be slow initially.

What it all means

Amazon isn't yet in the business of selling you cars, nor is it taking a slice of the transaction from dealerships. It is in the business of more easily connecting consumers looking for vehicles to dealerships using its extremely wide reach and helping them start or complete the transaction easily online.

That means for now, stocks like Carvana and CarMax (NYSE: KMX) have less to worry about, and the same goes for dealership groups such as AutoNation (NYSE: AN). But unlike traditional lead-generation business models, Amazon Autos enables its customers to complete their full transaction online before heading to the dealership. That, in combination with Amazon being the No. 1 retailer in the world, should make investors in listing sites and lead-generation businesses like Cars.com and CarGurus highly concerned over the long term.

Citigroup is an advertising partner of Motley Fool Money. Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, CarGurus, CarMax, and Cars.com. The Motley Fool has a disclosure policy.