TrueCar's Painter says split with AutoNation presents consumers with 'a choice'

TrueCar Inc. founder and CEO Scott Painter portrayed today’s split with dealership giant AutoNation Inc. as a clash of old and new approaches to auto retailing.

He also said that, “ironically,” the loss of AutoNation stores from TrueCar’s network of dealerships could prove financially positive for TrueCar.

“What happened today is the partnership with AutoNation just turned into, in a sense, a choice for the consumer,” Painter told Automotive News. “It really makes them our competition.”

Consumers who want “truth, transparency, an upfront price” will do business with TrueCar, he said, while those who want to buy cars in a traditional manner will go to AutoNation.

The two companies parted ways today in a dispute over customer data, and how much AutoNation, the largest new-car retailer in the U.S., was obligated to turn over to TrueCar.

Although TrueCar doesn’t sell cars as AutoNation does, Painter said his company is in the “customer-acquisition business” -- a field in which AutoNation is expanding its own branding and operations.

Data dispute

In a separate interview with Automotive News, AutoNation CEO Mike Jackson said his company was severing ties with TrueCar as of the end of July. Then on Friday, AutoNation said it would move up the termination date to Tuesday, July 15. 

Jackson said TrueCar had been trying to impose “onerous” demands, including requiring that AutoNation hand over extensive customer information for all of its transactions, not just TrueCar-related deals.

Painter characterized the split differently, saying TrueCar gave AutoNation “a clear line in the sand” and demanded the retailer comply with its data-sharing terms, which he called “marketplace requirements we need to enforce.”

“This isn’t AutoNation dropping TrueCar,” Painter said. “This is a very deliberate step on our part. We went to them and said, ‘You must comply with the rules.’”

He added: “The notion that anyone gets a hall pass on those requirements is untenable.”

In fact, Painter said, TrueCar has “fired” more than “350 dealers” in the last 12 months for refusing to comply with its terms. That is more than the 226 of AutoNation’s 240 dealerships that use TrueCar’s services.

TrueCar works with more than 11,000 dealers across the country.

More revenue?

Painter said that consumers searching for vehicles on TrueCar will end up going to non-AutoNation stores to follow through with purchases initiated on the website.

“Ironically, this could have a positive financial effect for us,” Painter said. “The customers that otherwise would have been introduced to AutoNation stores will immediately begin getting introduced to other TrueCar certified dealers.”

AutoNation, which represents 3 percent of TrueCar’s business, had negotiated a group discount with TrueCar, Painter said. Without AutoNation, “we lose a great anchor relation, but we could raise revenue” as a result, he said.

“Their decision not to comply is perfectly fine with us.”

Nonetheless, Painter said the loss of AutoNation business was “obviously a material event for us.”

The stock market agreed. The news broke late in the day, at a time when TrueCar stock was trading at about $11.20, a gain of more than 1.6 percent on the day. But it then fell, closing at $10.05, down 8.8 percent.

Past ties

At one time, AutoNation and TrueCar had close ties. They began cooperating with each other in 2006, and for a time Mike Maroone, then AutoNation’s COO, was one of TrueCar’s directors.

The two companies have had discussions for several months over TrueCar’s demands that AutoNation share large portions of the customer data it collects in its dealer management system.

The issue came to a head on May 23, when TrueCar presented AutoNation with a memo saying its “marketplace rules had to be complied with,” Painter said. “That is what prompted this outcome.”