AutoNation Dumps TrueCar in Customer Information Dispute

A dispute about the use of customer information has prompted AutoNation, America’s largest auto retailer, to cut ties with TrueCar, the fast-growing company that serves as a go-between for its dealers and car shoppers.

The breakup will cost TrueCar about $7 million annually in AutoNation revenue and comes after protracted but “professional” negotiations, Mike Jackson, AutoNation’s chief executive, said Friday.

A TrueCar contract term, which requires dealers to turn over information for all sales rather than just those where the lead was generated through TrueCar’s digital portal, was unacceptable, Jackson said.

“I don’t want to violate the privacy of customers who entrust us with our business,” Jackson said. “We can’t turn over all their information to an outside party. For all we know, they are selling it to other parties.”

The car-shopping company was asking Fort Lauderdale, Fla.-based AutoNation to adhere to the same rules other dealers in its network follow, said Scott Painter, TrueCar’s chief executive.

“TrueCar requires all its certified dealers to share a limited amount of vehicle purchase data,” Painter said.

The company, based in Santa Monica, Calif., operates a digital platform that helps consumers shop and price cars. Buyers can enter the make and model of the vehicle they are seeking to generate three no-haggle offers from participating dealers. TrueCar takes a $299 cut of each new-car transaction and $399 for used vehicles. It has about 10,000 car franchises in its network.

Talks between the companies broke down even though TrueCar offered AutoNation a 10 percent fee discount if 90 percent of its stores used the TrueCar portal.

TrueCar also provides consumers and dealers data on the actual prices currently being paid for a particular make and model – not just the sticker price.

The information TrueCar sought included customer names, phone numbers, email addresses, the vehicle identification number of the car purchased and the transaction price and date. AutoNation had the choice of submitting the information through auto-retailing information technology vendors or directly to TrueCar.

TrueCar said it needs the information to make sure it gets paid for the sales leads it generates and to create real-time data on the prices of vehicles. Painter said that helps dealers figure out how to price their cars and allows consumers to see the prices others paid for the car they want to purchase. He likened the data to a price quote for a stock on a major exchange.

TrueCar doesn’t sell the information, said Alan Ohnsman, a company spokesman.

“AutoNation was a major customer for a long time, got a favorable rate and self-reported the data,” Ohnsman said. “We believe they were under-reporting.”

AutoNation represented 3.1 percent of TrueCar’s $58.6 million in first-quarter revenue, according to TrueCar. The companies once were in close cooperation. Mike Maroone, AutoNation’s president and chief operating officer, served for a time on TrueCar’s board of directors.

Analysts said the AutoNation move will have limited effect on TrueCar.

“We view TrueCar’s firm stance enforcing its marketplace rules as a sign of strength, supporting our belief that the company has sufficient geographic and brand coverage to absorb consumer demand,” Doug Anmuth, a J.P. Morgan analyst, wrote in a report to investors.

With over 290 new-vehicle franchises in 15 states, AutoNation is a major player in auto retailing. It is developing its own web sales portal under the SmartChoice Express brand name.

Customers who visit the site can research prices that reflect current market values – usually discounted from the sticker price – and put a deposit on a car. Like TrueCar users, shoppers still have to visit the dealership to complete the transaction and take delivery of the vehicle.

Jackson and Painter have each talked about how auto dealers must change their sales models to emulate companies such as Apple and Amazon by offering better customer service and more pricing clarity.

“The car dealer should not be a time machine that moves backward,” Jackson said in a recent interview.

But TrueCar has become a controversial sales tool in the auto industry. Some dealers fear that the way it encourages no-haggle car prices cuts into their profits.

Some dealers in New York and a California dealer group are mounting challenges to TrueCar’s operations, alleging that the company violates various car-sales regulations. TrueCar says it complies with the rules, and notes that the state agencies that regulate the industry have not initiated any actions against the company.