GM And Amazon: Inside What Could Be The First Of Many Deals Between E-Commerce Giant, Automakers

General Motors Company GM has partnered with Amazon.com, Inc. AMZN to enable package delivery to 7 million connected vehicles.

The Street considers the arrangement not only a “natural fit” but also the first of many between automakers and Amazon.

The Rating

Morgan Stanley analyst Adam Jonas and five others maintained an Overweight rating on GM with a $48 price target.

The Thesis

The analysts see a “vast and lucrative revenue opportunity” for auto companies in the logistics end market. From vehicle storage and micro warehousing to last-mile delivery and edge computing, Amazon collaborations could be numerous.

“We see this as the start of a number of domains where partnership can help solve a problem for Amazon while developing new business models for the OEMs,” Jonas said in a Wednesday note.

With more than 100 million vehicles on the road, GM is considered well-positioned to expedite delivery for Amazon’s 100 million Prime members as well as the clients of other online retailers.

At the same time, Amazon could lean on automakers to diminish shipping and fulfillment expenses, which tallied $46 billion in 2017 and are expected to strike $64 billion this year. In fact, it could eventually do away with last-mile transportation costs altogether.

“With access to the vehicle, once the cars become autonomous, AMZN can have customers send cars to the AMZN DC/stores for package pickups rather than AMZN having to deliver the last mile,” according to Morgan Stanley.