Amazon's partnership with GM is a 'vast and lucrative' opportunity for the struggling automaker (AMZN, GM)

pulse

April 25, 2018 8:06 PM

Amazon will now deliver packages to certain GM vehicles, but the relationship could expand to much more than delivery: mapping, logistics, and storage could be on the table too.

Not only will this help Amazon reduce delivery costs, the partnership could expand well beyond shipping, Morgan Stanley says.

Amazon on Wednesday announced the launch of Amazon Key In-Car, allowing the company to deliver packages directly to the trunk of a car for owners GM models with an active OnSta subscription, GM's in-car voice assistance service.

That's only the beginning of endless possibilities for cars as they become more autonomous, Morgan Stanley says.

"We have highlighted the opportunity for auto companies to tap into the logistics end-market as a vast and lucrative revenue opportunity," analyst Adam Jonas told clients Wednesday. "Our excitement stems from the opportunity for OEMs to help online retailers dramatically increase the efficiency of their fulfillment and shipping activities."

The bank estimates there are 1.2 billion cars in the world, with an average volume of about 100 cubic feet. Not only is there fallow space the size of 3,500 Empire State Buildings waiting to be unlocked, the possibilities go well beyond shipping, into areas like mapping and customer engagement.

"We see numerous areas for GM to collaborate with firms such as Amazon," said Jonas. "In addition to in-vehicle storage/micro warehousing collaboration, we identify final-mile delivery fulfillment, edge computing, digital content, and other customer engagement opportunities."

It's in Amazon's interests, too. The retailer spent $46 billion on fulfillment and shipping in 2017, its annual report shows. With FedEx and UPS at near full-capacity, finding creative ways to ship packages the "final mile," could help Amazon avoid further tussles with the U.S. Postal Service amid increased scrutiny from President Donald Trump.

"The last mile is the most expensive and complex part of the eCommerce supply chain, which is why e-tailers/retailers are trying to avoid the move altogether by incentivizing customers to pick up in-store or having store employees deliver packages on their way home from work," Jonas said.

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