AutoNation calls TrueCar one of its best partners.
Such a statement would have been unheard of just three years ago, when the retail giant had a public falling out with the shopping site over demands for data access that it called “onerous,” “unconscionable” and “unacceptable,” culminating in a July 2015 divorce.
Within a month, TrueCar founder and CEO Scott Painter resigned and the company was in the throes of another makeover to prove that it could be a potent force in auto retailing without antagonizing the retailers.
This time, it appears to have worked. Under Chip Perry, the former Autotrader executive who succeeded Painter in late 2015, TrueCar is not a different company, but it’s a very different brand, casting itself more clearly as the friend of the auto dealer — a conduit for transparent pricing information and marketing efficiency, rather than rock-bottom deals.
The changes have included new ad messaging that was more favorable to dealers and did away with phrases such as “never overpay,” language that irked dealers by implying they were inclined to overcharge consumers.
The site also stopped letting consumers anonymously view vehicle pricing without submitting contact information. And it changed its site layout by eliminating the page that listed competing dealerships’ prices, while hiring more field reps to help train dealers on how to use the site’s tools.
“In the past, [TrueCar] had been tilted significantly in a way that dealers found was harmful to them,” Perry told Automotive News. “We were able to find win-win improvements that enabled the site to continue to perform well for consumers while being much more positive for dealers.”
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In the process, TrueCar gave up some of what made it distinctive in a sea of lead generators: a powerful consumer-facing brand promise, the mantle of disrupter and a knack for seizing on shoppers’ traditional distrust toward auto dealers.
Without that posture, its brand often takes second billing to those of its affinity partners, including USAA, Sam’s Club, American Express and Chase, which market car-buying services powered by TrueCar’s technology and dealer relationships.
TrueCar, which once antagonized auto dealers with its marketing and data policies, now pledges to be a good partner to retailers.
‘Dealers are coming back’
This year, TrueCar hired the firm Wolfgang of L.A. to lead a rebranding and marketing campaign that is expected to launch in the next few months. “TrueCar was really innovative when they launched in 2008,” Seema Miller, president of Wolfgang, was quoted as telling AdWeek in February. “But the marketplace has become incredibly competitive lately, and they recognized the need to separate themselves.”
But the tamer TrueCar did rebuild those dealer relationships, which have proved crucial to its turnaround. After many rounds of defections by disgruntled dealers, the number of franchised dealerships in TrueCar’s network has grown by about 3,000 over the past two years, with AutoNation coming back on board in 2016, though the growth has slowed in recent quarters.
“A couple years ago, there was no way they were going to be a partner. We pulled out,” Marc Cannon, AutoNation’s chief marketing officer, told Automotive News. Now, “one of our best partners we have is TrueCar.”
TrueCar, Cannon said, no longer focuses on helping consumers “beat the dealer.”
“The whole TrueCar model is no longer the race to the bottom,” he said. “It’s no longer, ‘How much data can we keep, and take that customer and claim them as our own?’ If we were back on the old model, you would’ve continued to see dealers exiting in droves. Today, dealers are coming back and wanting to partner with TrueCar.”
Bob Hager, COO of Ourisman Automotive of Virginia, remembers when TrueCar’s pricing structure — the commissions or subscription fees it charged for sales that passed through one of its websites or apps — drove his company away for several years. He said that in one stretch, pricing doubled three quarters in a row.
TrueCar’s monthly fees, he said, have become more consistent. Depending on the franchise, Hager said his stores can pay from $3,000 to $12,000 per month for the sales transacted through one of TrueCar’s sites. Hager said TrueCar has found a place where it can have “comfortable recurring revenue” where most dealers can say, “This is a pretty fair deal.”
The quick turnaround was the only way TrueCar could have survived, Hager said.
“They felt they were entitled to all the profit in the sale and [thought that] we didn’t provide anything but the car itself,” Hager said. “They had to lose that attitude quickly, or they’d be out of business.”
Dennis Ellmer, CEO of Priority Automotive Group, with stores in Virginia and North Carolina, said he’s relieved that TrueCar ads no longer portray dealers as a “bunch of dummies.”
Ellmer said he now has a TrueCar rep assigned to his group that he deals with regularly.
“For me, there’s a term I like: ‘One throat to choke,’ ” he said. “If I’ve got a problem, I don’t want to talk to 10 people to discuss it. I want to be able to call one person. With TrueCar, I have that.”
In its first-quarter earnings report last week, TrueCar said its franchised dealership tally, which counts each brand at each location separately, was 12,205, up from 9,281 at the end of the first quarter of 2016; its net loss widened to $9.1 million from $6.8 million a year earlier, while revenue grew 7 percent to $81.1 million.
TrueCar has had to reinvent itself before. The company nearly collapsed in late 2011, as regulators in several states accused it of operating illegally as a broker, and dealers defected in huge numbers over complaints that TrueCar’s low-price promise to consumers encouraged a profit-killing race to the bottom.
TrueCar’s tilt away from cutthroat pricing has been good for its standing among dealers. But Sam McBride, an investment analyst at research firm New Constructs, wonders if TrueCar has lost its identity in the process. He said it will be difficult to build a competitive advantage around convenience when numerous other third-party sites can offer the same.
McBride said TrueCar came into the car business looking to disrupt the industry, but that changed once the company realized it needed to establish a less adversarial relationship with dealers to survive. TrueCar now must try to appease dealers while offering enough benefits to make its sites useful for car shoppers.
“The fundamental issue they discovered is they came out wanting to disrupt the dealer business model, but they don’t have the leverage to take on the dealers in that way,” McBride said. “If you look at their scale right now, they accounted for less than 6 percent of sales in the U.S. They just can’t really take on the dealer with any sort of leverage. It’s going to [take] a large company like Amazon to disrupt the dealer business model.”