CEO: TrueCar growing, dealership profits are up

DETROIT -- TrueCar Inc. expects participating dealerships to sell 400,000 vehicles this year from the shopping site, up 60 percent from the 2012 total, CEO Scott Painter said last week.

TrueCar now has 6,600 participating franchises and is adding more to expand geographic coverage, Painter said.

That's a far cry from early 2012, when regulatory woes caused TrueCar's network of franchises to fall from about 5,600 to a low of about 3,200.

Today, TrueCar is profitable, Painter said, and participating dealerships are earning more from TrueCar leads. Average gross profit on those sales has risen $100 per new vehicle to $350 today, from $250 a year and a half ago, he said.

"We've shifted our [marketing] emphasis from offering the lowest price to the consumer not overpaying," Painter said in an interview here.

Painter engineered a transformation of TrueCar in 2012 after the company had to suspend operations in several states temporarily to fix regulatory concerns about TrueCar advertising and pricing practices. The company lost $75 million in 2012 on revenue of about $85 million, he said.

Among the biggest changes was the elimination of cutthroat bidding among dealers for TrueCar customers. Under the discarded system, dealers could see the bids of other dealers. Now dealers offer prices to TrueCar customers without knowing what competitors are bidding, Painter said.

As a result, dealers make more money on TrueCar customers than they did under the old system. Average transaction prices are now in the 30 percent range of lowest prices in a market, up from the bottom 5 percent before the reforms, Painter said. TrueCar also came into compliance with consumer and pricing laws in all states by mid-2012, he said.

TrueCar operates in all but a handful of states with a pay-per-sale model. When TrueCar customers buy cars from dealerships, the dealerships pay TrueCar $299 for every new vehicle sold and $399 for every used vehicle. In a few states, participating franchises pay a monthly subscription.

With revenue expected to grow to $130 million this year and additional growth on the horizon, Painter said TrueCar has adequate capital. But he said he has gotten interest from investors to provide additional capital.

Painter said the company's transformation also involved replacing TrueCar's marketing team and several top managers.

He said executives obsessed with fetching the lowest prices for customers were let go and replaced with people who realized that a transparent shopping experience could yield a fair price for consumers and some profit for dealers.

TrueCar now employs 260 people, compared with 300 at its peak in early 2012.