TrueCar (TRUE - Get Report) said it overhauled its digital platform for carbuyers and adjusted its business policies in order to improve the benefit to customers and dealers, following a three-month "assessment" by the company's new CEO.
The company's shares, which were battered last year after the nation's No. 1 dealer group AutoNation (AN - Get Report) dropped affiliation with the company, rose briefly in November on the hiring of Chip Perry, an industry veteran, as CEO to replace Scott Painter. But shares have collapsed again, falling 44% year to date on a weak fourth-quarter report and tepid guidance for 2016.
Although thousands of car dealers nationwide became customers of TrueCar's digital service, which reveals average prices paid for vehicles, many opposed "race to the bottom" pricing that squeezed their profit margins. AutoNation was among dealers that resisted TrueCar's use of proprietary customer data.
"Our goal is to provide the best value for car buyers and dealers among all third-party automotive sites, but it was apparent to me that there were aspects of TrueCar's service that were suboptimal," Perry said in a statement. More changes will be undertaken this year, the company said.
A new crop of digital start-ups, funded by more than $500 million in capital, are under way with the aim of allowing consumers to buy and take delivery of new and used vehicles without visiting dealerships in the conventional manner.
One school of thought among investors was that TrueCar had become a "left for dead" stock upon the resignation of Painter. The hiring of Perry, a founder of the AutoTrader Web site in the 1990s, showed that directors could pull a rabbit out of their hat, perhaps justifying more patience and a longer-term view of the company's potential.
Alan Ohnsman, a TrueCar spokesman, said consumers will receive more detailed and accurate pricing information about specific vehicles in inventory, rather than vehicles they can configure according to preferred options and colors. The goal -- "no surprises" when they go to the dealership to close the transaction.
Dealers now will be able to subscribe to the service for a flat fee, rather than pay according to the number of transactions, Ohnsman said in an email.
Of the five analysts that have issued recommendations on the stock in 2016, four have reiterated neutral ratings and one has downgraded to a sell from a neutral, according to MarketBeat.
The next six to 12 months could be decisive for Perry and TrueCar, since the new-vehicle market in the U.S. is in the late stage of a growth cycle. Once sales flatten or fall, dealers will be looking for ways to cut marketing costs, a category that includes money spent on TrueCar's services.
Those investors that have hung on will be watching and listening carefully to determine whether U.S. car dealers -- the most critical constituency influencing the company's recovery -- approve of Perry's new approach.