Online vehicle marketplace TrueCar has acquired Irvine-based Digital Motors, a company that assists auto dealers, original equipment manufacturers and lenders in developing an online sales platform for their automotive transactions.
The TrueCar website allows potential buyers to search for a particular vehicle and then see which dealers have the car for sale. The company is touting the acquisition of Digital Motors as a means of accelerating its plan to create a revitalized e-commerce platform called TrueCar+.
“With TrueCar+, we are creating an asset-light marketplace where consumers have easy and transparent access to a national inventory of vehicles and our dealers have efficient and turn-key access to a national audience of consumers,” Mike Darrow, chief executive of TrueCar said in a statement. “Our acquisition of Digital Motors is a key step in the acceleration of that marketplace, providing immediate access to new capabilities to enable the development of a secure online purchasing and financing experience.”
Darrow added that TrueCar believes the acquisition will help the Santa Monica company attract more dealers, brands, manufacturers and lenders. TrueCar has approximately $235 million in cash and equivalents on its balance sheet as of the end of this year’s first quarter.
“Digital Motors’ configurable and scalable online retailing engine, which can be adapted for a range of automotive use cases, will complement the transactional focus of TrueCar+,” Andreas Hinrichs, chief executive of Digital Motors, said in a statement.
Dealer surveys from last year found that sales related to the Digital Motors online store produced a 50% reduction in closing time and an average closing rate increase of 47%. The company began its foray into the marine industry last year through providing its online sales solution to more than 4,000 recreational boat and yacht retailers.
TrueCar’s purchase of Digital Motors marks another effort by the company to turn its operations around. In recent years, the company has faced multiple challenges, including lawsuits.
The company faced a 2015 lawsuit from the California New Car Dealers Association that was settled in 2017. The trade group represented more than 1,000 California automotive dealers and accused the TrueCar shopping service of operating as an auto dealer and broker without a license from the state Department of Motor Vehicles. Back then, the company’s business model of comparing the price offered by various dealers for the same model car was criticized for encouraging dealers to underbid each other, effectively creating price wars.
The case was settled, with TrueCar agreeing to change its format to a flat-fee subscription model and agreed to double indemnification provided to the California auto dealers that participated in the company’s program. The flat-fee subscription billing model did not include the company’s standard “sales guarantee” as a retroactive adjustment mechanism.
Since June 2017, TrueCar’s stock has slid significantly, from around $19 per share to $3.09 as of June 9. The company posted revenue of $43.5 million in the first quarter of this year, a 33% year-over-year decline.
The company’s acquisition of Digital Motors has been flanked by further efforts to correct course, with the addition of a chief operating officer, senior vice president of product and a chief people officer within the last seven months.
TrueCar’s chief operating officer, Jantoon Reigersman, joined the company last year and also serves as its chief financial officer.
“As our chief financial officer, Jantoon has been a key contributor to developing our business strategy and advancing new key initiatives and offerings, including TrueCar+,” Darrow said in a statement. “This appointment allows him to expand his contributions to accelerate our growth and transformation.”