A dispute about the use of customer information has prompted AutoNation, America’s largest auto retailer, to cut ties with TrueCar, the fast-growing Santa Monica 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, AutoNation Chief Executive Mike Jackson said Friday.
TrueCar operates a digital platform that helps consumers shop and price cars. Buyers can enter a vehicle’s make and model 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.
AutoNation is rolling out a similar digital sales program for its 290 auto franchises in 15 states.
The key sticking point was a contract requirement that dealers turn over information for all sales, not just those generated through TrueCar, Jackson said.
“I don’t want to violate the privacy of customers who entrust us with their 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.”
TrueCar was asking Fort Lauderdale, Fla.-based AutoNation to adhere to the same rules other dealers in its network follow, TrueCar CEO Scott Painter said.
“TrueCar requires all its certified dealers to share a limited amount of vehicle purchase data,” Painter said.
He said TrueCar ended the relationship because AutoNation wanted discounted fees and refused to follow TrueCar’s reporting requirements.
Talks between the companies broke down even though TrueCar offered AutoNation a 10% fee discount if 90% of its stores used the TrueCar portal. AutoNation said it would stop using TrueCar on Wednesday.
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, which also provides consumers and dealers information on the prices being paid for a particular make and model, said it needs the information to create real-time data on the prices of vehicles. Painter likened the data to a price quote for a stock on a major exchange.
The company also wants to make sure it gets paid for the sales leads it generates.
“AutoNation was a major customer for a long time, got a favorable rate and self-reported the data,” said TrueCar spokesman Alan Ohnsman. “We believe they were underreporting.”
AutoNation represented 3.1% of TrueCar’s $58.6 million in first-quarter revenue.
After falling almost 9% on Thursday, TrueCar’s stock rebounded 61 cents, or 6.1%, to $10.66 on Friday.
Analysts said the AutoNation move would have a 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.
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.
TrueCar has become a controversial sales tool in the auto industry. 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.