The news that AutoNation has parted ways with TrueCar hit both stocks in ways that one might not have expected. TrueCar’s shares fell $0.97 while AutoNation’s rose $0.46. Is it a reflection of confidence in the traditional automotive sales model, a fear that other dealers might follow the largest new car seller in the nation, or something else? Looking at the initial effect might shed some light.
For both companies, it represents a 2-3% drop. AutoNation credited TrueCar with around 3% of their sales while they represented over 2% of TrueCar’s certified dealer network. If AutoNation was paying an average of $300 per sale and if they sold around 16,500 vehicles through TrueCar, it means they can save or reinvest around $5,000,000 per year on other efforts. This will be a test that the whole industry will watch to see if a scaled loss of TrueCar customers and costs translates into more or less sales.
In theory, I like much of what TrueCar is trying to do. They’re embracing transparency and a modern buying style. However, their approach to dealers and their positioning with customers needs some work. They’ve stated that they are working on bringing their transparency model to other areas of the automotive buying experience such as loans, leasing, trade-in, and service. My concern is that if these additional services aren’t brought to market properly, the minor revolts and occasional lawsuits from dealers and investors could turn into a mass exodus. It’s one thing to push to market reduced profit margins on new car sales. Those numbers have been dropping since the internet became a thing. If they do not handle the transition into other profit centers properly, they could make bigger enemies.
Personally, I’d like to see their positioning in the industry change. I want to like TrueCar because I think they can do a lot for both dealers and consumers alike. As things stand, they’re positioned improperly to dealers. Anecdotally based upon feedback on various forums and blogs frequented by dealers (not to mention every dealer I’ve spoken to about the company) it would seem that either their ad agency, PR department, or management team has failed to put the company in a positive light. With approximately half of the franchise dealers in the country being TrueCar certified, one might wonder how this could be. Unfortunately, the “word on the street” is that dealers do not like TrueCar’s practices but feel that they have to use them if they want to compete with the big boys. The departure of the biggest of the big boys might start changing some minds.
I’ve reached out through different channels to discuss positioning and products with TrueCar, but my company may be too small to get their attention. Now I turn to you guys. I’d like to offer insight on how they can fulfill their goals and disrupt the industry in a way that dealers can embrace out of desire rather than fear. I just need someone to contact me about it. If you know anyone there, please forward this to them. We’re a tiny company by comparison (our IPO is tentatively planned for 2027), but that doesn’t mean we can’t consult with them in a meaningful manner.