OPINION: Disruption of the US car sales sector by an e-commerce interloper sends a warning to Australia.
Australians can’t buy a new car on US-based retail behemoth Amazon. Yet.
But American consumers can, and what happens over there has a habit of washing up in Australia sooner rather than later.
The entry of Amazon into the congested, competitive new car market is the latest example of how e-commerce can disrupt an established business model. That said, Amazon’s car operation is relatively straightforward compared with a much more significant disruptor named Carvana.
The difference between Amazon and Carvana is that Amazon works with established car dealers, with its website effectively a marketing tool and a browsing site for buyers.
Someone wanting a new Kia, Subaru or Jeep can visit the Amazon website to look at what participating dealers have to offer before placing an order and completing the purchase with a local car yard.
Much of the paperwork is done online but the transaction is completed at the dealership where the car is collected.
Carvana, which started as an online used-car platform, is very different because it has added new car sales to its offering, much to the chagrin of established dealers.
The Carvana business model is a complete non-contact transaction, with all the paperwork done online, the car delivered to the buyer and any trade-in taken away for sale through the firm’s used-car arm.
One of the keys to the Carvana business is that it bought a small, established new car dealership in Arizona, which held a licence with Stellantis, the maker of Jeep, Dodge and Chevrolet in the US.
Stellantis is the smallest of the US car makers and also produces European vehicles such as Peugeot, Fiat and Alfa Romeo.
It was keen to see whether Carvana could boost its flagging sales. However, what started as an extension of Carvana’s used-car business and growth booster for Stellantis is now threatening to upend the entire US new car industry.
Earlier this month, The Wall Street Journal reported that the Arizona dealership acquired by Carvana had been selling between 30 and 50 vehicles a month. It is now reported to be selling about 350 a month with deliveries being made across the country.
Rival dealers are struggling to compete with Carvana, which has grown from its creation in 2012 as an online used-car business into a company with a stock market value greater than any US car maker.
Late May share prices are a measure of how Carvana, with its internet-shop approach to selling cars (new and old), has emerged as a classic e-commerce disruptor.
With a market capitalisation of $US70 billion, Carvana is valued at more than Stellantis ($US22 billion), Ford ($US54 billion), and General Motors ($US69 billion).
It’s not known whether a business selling new cars on the internet can succeed in Australia, or even win government approval, but there are whitegoods retailers operating a similar model of online sales, delivery and removal of old appliances.
There is also the example of how Mercedes-Benz revolutionised its Australian business model by dumping the established dealership model to effectively deal directly with customers.
Rather than a dealer buying cars from Mercedes-Benz and then setting their own price, which could vary between customers, the car maker now sets the price, and the dealer can only earn a commission.
Mercedes-Benz likes the new model and so do customers, who no longer have to haggle with a car salesman to get the best price without ever knowing whether they did.
The Mercedes-Benz move triggered a bitter legal fight, which the dealers finally lost last year after appeals to the Federal Court.
If there is a business lesson in the Mercedes-Benz change and the Carvana revolution in the US it is that the middleman in vehicle transactions is being squeezed out by the ongoing technology (e-commerce) revolution.
And that’s a story as old as business.
Power agency
AUSTRALIA’S struggle with modernising its electricity generation and delivery system is likely to become more challenging as the boom in artificial intelligence (AI) data centres moves into overdrive with the advent of agentic AI.
Data centres worldwide are already major consumers of electricity, but according to a
research report by the investment bank Goldman Sachs, agentic AI systems are between 60 and 130 times more energy-intensive that AI chatbots.
The bank uses the US to demonstrate an emerging electricity shortage as well as a shortage of other basic services such as grid infrastructure (poles and wires), connectivity, and high-voltage components.
Rather than see the development of agentic AI as a negative event, however, Goldman Sachs suggests it is a business opportunity. It says investors are being offered a range of new ways to gain exposure to a revolutionary technology, with demand expected to boom for services involved in what essentially will be a rewiring of the US.
The reason agentic AI is so energy hungry is that it does a lot more than simply responding to a prompt (question) from a user. It takes on tasks, uses digital tools, and can make decisions.
Simple AI might involve writing a letter or an email when given a set of instructions. Agentic AI and its agents (autonomous software that can make decisions) reacts to a goal such as finding the cheapest car you want anywhere in Australia and completing the purchase.
“We believe always-on agents are turning the AI race into a competition for physical readiness, exposing choke points in power, grid build-out, high-voltage components, cooling connectivity and mission-critical services,” Goldman Sachs said.
In other words, the AI rush has gone beyond simply supplying computer chips into ensuring that the basic building blocks are available. Even in the US, though, there is a struggle to supply enough electricity.
Goldman Sachs says the US is heading for a 45-gigawatt shortfall in data centre power by 2028, with 72GW of new power required by 2030.
Australia will encounter the same data centre challenge as the US but lacks the depth of that country’s electricity systems, given its extensive use of coal, gas, and nuclear power.
Given Australia is increasingly relying on wind and solar power, energy policy changes might be needed if the country Australia wants to avoid missing the agentic AI boom.
