What’s Behind the AutoNation-TrueCar Divorce

TrueCar’s thirst for data disconcerts many auto retailers, including the country’s largest dealership chain.

Marty Bernstein

August 17, 2015

4 Min Read
Painter on day of TrueCarrsquos IPO last year
Painter on day of TrueCar’s IPO last year. ​Andrew Burton/Getty Images

In the AutoNation-TrueCar divorce, the irreconcilable differences center on one thing: data.

Data that is a significant byproduct of the sale of a new vehicle. Data that was demanded of AutoNation, the country’s No.1dealership chain, by TrueCar as part of a contract renewal.

TrueCar provides sales leads to dealers and pricing information to consumers. It has had a contentious relationship with some dealer camps. Critics claim the company squeezes its data from clients.

Another reason for AutoNation dropping TrueCar as a lead provider is that the dealership chain is trying to reduce the number of leads it buys from third-party sources.

The company is developing an aggressive e-commerce consumer marketing program and is launching its own transactional website, AutoNation Express.

AutoNation CEO Mike Jackson says phase one of AutoNation Express gives consumers the online ability to get a guaranteed price and reserve a vehicle in the dealer’s lot.

The next step, “We’ll Buy Your Car,” is in pilot mode. Pending are financing and customer care online functions.

“The combination of our strong AutoNation brand with consumer empowered transactional site that is seamlessly integrated into our dealerships is something no one else in the industry is doing,” Jackson says at a recent conversation with journalists.

He adds, “Before we started this effort, our digital site generated less than 10% of the business and now it is over 20% of the business…Yeah, this is working.”

TrueCar doesn’t charge dealers for its leads, until they are converted to sales. Then the fee is up to $400. To confirm a sale has been converted, TrueCar goes into the dealership management system. It says it doesn’t poke around in there for information. But it does contractually require a lot of data from dealers.

Here’s what it wants:

Customer data:

Name (Buyer and co-buyer), address, primary phone number, cell phone number, email address, zip code.

Vehicle data:

VIN number, make, model, body type, year, color, options, stock number, style ID, engine, fuel type, mileage, new or used as well as trade make, model, year and color.

Deal details: Deal number, status, salesperson, dealer ID, store name, contract date, inventory date, days to turn, dealer zip code, front revenue and front cost.

Deal type: MSRP, invoice price, rebate amount, trade actual cash value, over/under allowance.

TrueCar was launched in 2005 when founder and CEO Scott Painter raised more than $185 million from venture capitalists while pitching a new way for consumers to buy vehicles at the lowest possible price.

TrueCar went public last year. This month, Painter announced he will step down as CEO by the end of the year. Word of that came after TrueCar reported a second-quarter net loss of $14.7 million on revenues of $65.3 million. TrueCar stock had dropped 46% in four weeks.

The company is defending itself from three dealer lawsuits that challenge its business model. It seems like it is beleaguered.

In an earlier conference call with analysts, Painter said the second quarter was a “wake-up call to focus on the business.”

It’s hard to determine what led to Painter’s plan to step down as CEO. It could be a combination of things. The day of the announcement, TrueCar stock fell another 6% to $5.54.

Painter is polarizing but he can show introspection. In a Los Angeles Times interview, he noted he had, “a strained relationship with the very dealers the company needs to work with.”

It would seem logical that TrueCar might reposition itself in the marketplace.  Neither Painter nor TrueCar President John Krafcik was available to answer submitted questions. Chief Marketing Officer Lucas Donat offered written responses about how TrueCar might enhance its public image. Here’s an edited version of the Q&A.

Q: What new consumer marketing-advertising initiatives will be launched?

A: There is likely to have a refresh in the beginning of 2016 with little adjustment. We will see an increased investment in dealer outreach and marketing.

Q: What media will be used?

A: We will continue to invest in TV, radio and digital, which includes SEM (search-enging marketing). Our marketing strategy is metrics-driven and we only pursue ROI positive opportunities. We will also have an investment in some event and experiential marketing.

Q: When will new plans be introduced?

A: We can’t address timing at this point.

Q: Added or redirected budget?

A: Funding for some of our elective projects may be allocated elsewhere, but our core advertising and marketing strategy will not change.

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