Texas Dealers Could Face Fines Over CarGurus Business Practices

By Brittany-Marie Swanson

AUSTIN, Texas —The Texas Department of Motor Vehicles Enforcement Division issued a cease-and-desist letter to CarGurus and the Texas Automotive Dealers Association (TADA) last week, stating that it will take enforcement action against dealerships if the automotive shopping site does not revise its advertising practices within 30 days.

At issue is the way CarGurus lists the prices of used vehicles on its website, including projected savings below market value and price drops. “… A savings claim or discount offer is prohibited except to advertise a new motor vehicle,” the DMV’s letter, obtained by F&I and Showroom, read, in part. “No person may advertise a savings claim or discount offer on used motor vehicles.”

The Texas DMV Enforcement Division says that unless CarGurus removes the “offending advertisements” within 30 days, it will take action against dealerships with inventory listed on the site to the tune of $10,000 in administrative penalties each day a violation occurs, as well as other disciplinary actions.

Industry pundits like F&I and Showroom and Auto Dealer Monthly columnist Jim Ziegler have been critical of CarGurus’ business practices, claiming, among other things, that the firm displays dealers' inventory on its site without their knowledge.

“I personally view CarGurus as the most hostile, anti-dealer website yet,” Ziegler wrote in a June 2013 column. He also placed the blame on other lead-generating sites like Cars.com for feeding dealer inventory to CarGurus.

“Another thing I don’t like about CarGurus.com is the site rates dealers and their deals,” Ziegler wrote, in part. “Labels, from my understanding, include ‘Great,’ ‘Good,’ ‘Fair’ or ‘Bad’ dealers. What gives the site the right to do this? And what standard is it using to rate these deals?”

On Wednesday, CarGurus Director of Legal Allison Beakley contacted Texas dealers alerting them to a call between the company and the DMV’s Director of Enforcement Bill Harbeson and Corrie Alvarado, the enforcement attorney who signed the cease-and-desist letter. The call is scheduled to take place today, April 30.

“We plan to resolve this issue promptly and prior to the 30-day deadline,” Beakley wrote. “In addition, we will update you by Tuesday, May 5, of the results of our call with the Texas DMV and the status of the issue.”

A CarGurus spokesperson, who confirmed the firm works with more than 6,000 U.S. dealers and gets inventory feeds from more than 100 sources, including inventory hosts, vehicle OEMs and other third-party lead providers, said the company is working with the Texas DMV to resolve the issue.

“We are working closely with the Texas Department of Motor Vehicles on this issue, and we expect to have a resolution very soon,” read the statement the CarGurus spokesperson issued to F&I and Showroom. “Once resolved, we will communicate immediately with our dealer customers in Texas.”

Copied on the Texas DMV’s cease-and-desist letter to CarGurus was Karen Phillips, executive vice president and chief counsel for the TADA. In an interview with F&I and Showroom, she said the association won’t be involved in today’s discussion between the Texas DMV Enforcement Division and CarGurus.

“That’s between the two of them,” she said of today’s call. “I did send out the information to my membership to let them know what was going on.”

Phillips added that dealers are subject to the jurisdiction of the agency for their own advertising and if they have an agreement with CarGurus to market their inventory, but she doubted dealers would be held responsible for any advertising violations if CarGurus posted their inventory on its site without their knowledge.

“If an entity has web-scraped their information and the dealer doesn’t know about it, then I’m certain that the agency will take that into account,” she noted. “And I think that might be an issue where if I were to receive a complaint from the agency, and I could show that I had not signed up with whatever service provider that is, because I don’t have a contract with them, then I think the agency would take that into account when deciding whether or not to go forward with the complaint.”

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Texas Dealers Could Face Fines Over CarGurus’ Business Practices
Texas Dealers Could Face Fines Over CarGurus’ Business Practices

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Car-Buying Frenzy Lifts AutoNation to 1Q Beat

By Matthew Rocco

AutoNation (AN), the largest U.S. chain of auto dealers, recorded better-than-expected earnings for the first quarter as Americans continued to scoop up cars and trucks.

The company booked a profit of $111.5 million, or 97 cents a share. That reflects 17% growth compared to earnings of $96 million, or 79 cents a share, in the same period a year earlier.

Revenue expanded 13% to $4.94 billion, driven by new and used vehicles. Retail sales of new cars rose 10%, and used cars were up 12%.

Analysts were looking for smaller quarterly earnings of 89 cents a share and revenue of $4.84 billion. AutoNation shares advanced 0.3% to $65.06 in recent trading. The stock, which jumped as high as $67.50 Wednesday, is up roughly 7.8% year-to-date.

Chief Executive Mike Jackson said the auto industry remains on pace to sell at least 17 million light vehicles this year. In 2014, total volume came in at 16.52 million, a 5.9% increase year-over-year.

According to research firm Autodata, U.S. auto sales through the first three months of 2015 are up 5.6% at 3.95 million units. First-quarter sales of trucks and sport-utility vehicles grew 11%, more than offsetting a slight decline for passenger cars.

The car-buying frenzy has benefited AutoNation dealers, especially retail locations that sell vehicles made by General Motors (GM), Ford Motor Co. (F) and Fiat Chrysler Automobiles (FCAU). Detroit’s Big Three have reported significant demand for pickup trucks, as well as SUVs.

AutoNation’s domestic segment, which includes the Big Three, logged a 24% increase in first-quarter operating income. Import brands accounted for 15% growth. The premium luxury unit’s operating profit was up 13%.

The Fort Lauderdale, Fla.-based company also got a boost from its finance and insurance business, which lifted revenue 20% over last year’s results. Gross profit per vehicle was $1,513 versus $1,398.

AutoNation purchased several dealerships in California, Washington, Georgia and Nevada during the first quarter. Combined, the stores have annual revenue of $320 million.

Industry experts foresee more consolidation among dealers. Recent acquisitions have come from large chains like AutoNation and outside investors like Warren Buffett’s Berkshire Hathaway (BRKA).

Last fall, Berkshire announced a deal to buy Van Tuyl Group, one of the largest privately owned dealership groups. Berkshire subsequently renamed the company Berkshire Hathaway Automotive, and Buffett has hinted at plans to add more dealers over time.

During a conference call with analysts, Jackson said AutoNation has not seen a big increase in buyer competition. Rather, more sellers are “testing the market with unrealistic expectations.”

AutoNation will continue to pursue acquisition opportunities, Jackson added.

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Car-Buying Frenzy Lifts AutoNation to 1Q Beat

Car-Buying Frenzy Lifts AutoNation to 1Q Beat

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The Gap Between Auto Dealers and Social Media

By: VINDU GOEL

Matt Howell, the general manager of a Hyundai dealership in Huntsville, Tex., has been in the auto business for 18 years. In all that time, he said, “I can think of one deal that originated on Facebook.”

In January, marketing managers at Hyundai’s American headquarters in Southern California persuaded Mr. Howell to give social media a more serious try. They asked him to use new software to post videos, photos and text updates suggested by the company on Facebook, Twitter and other social networks.

Two months into his social media experiment, the efforts had drawn such little reaction that Mr. Howell, 42, decided to drop out of the program.

Although he plans to keep posting photos of happy buyers on Facebook and encouraging them to write reviews, he does not have much use for the rest of it — especially since Hyundai began charging $275 a month for the service.

To Mr. Howell, selling a car boils down to one basic principle: Treat your customers well, and they will sing your praises to friends and family. “Those personal relationships are more important,” he said.

Hyundai of Huntsville’s experience illustrates how far social media still has to go to serve small, locally focused businesses. While large companies have learned how to stand out on social networks and get lots of hand-holding from sites like Facebook and Twitter, most local business owners are left on their own and remain stumped by social marketing.

Nowhere is that gulf more apparent than in the auto industry. Car manufacturers including Hyundai and Ford Motor have embraced social media and spend tens of millions of dollars on sophisticated marketing campaigns. Yet many of their local dealers barely maintain a Facebook page.

Some experts question whether local businesses even need to be active on social media.

“It’s like the old days: You need to be in the Yellow Pages. But is it going to meaningfully drive your business? Probably not,” said Chris Luo, who headed Facebook’s efforts to woo small and medium-size advertisers until 2012 and now works for FiveStars, a start-up that helps small businesses keep up with loyal customers.

Still, if a business does plunge into social media, Facebook and outside experts said, the most reliable route to success is to pay to promote posts as ads — something that Hyundai is not yet teaching its dealers.

“If you want predictable results for your business, ads are a cost-effective way to get them,” said Dan Levy, Facebook’s global director of small business.

Hyundai said it knows social media advertising is important, but it noted that dealers need to learn the basics of creating good content first. “If you hit anyone with it all at once, it would be very overwhelming,” said Jon Budd, who oversees new media at Hyundai Motor America.

He said that the three-year program had just begun and that it was too soon to judge the results.

Many local dealers worry that they need to be on Facebook, Twitter and whatever comes next, even as they struggle to understand how the services can help sell cars.

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The Gap Between Auto Dealers and Social Media

The Gap Between Auto Dealers and Social Media

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Tesla free to sell cars in New Jersey as Christie signs bill

By: Autonews

TRENTON, N.J. (Bloomberg) -- Tesla Motors Inc. will be allowed to sell its electric cars straight to consumers in New Jersey, after Republican Gov. Chris Christie signed a bill overhauling the state’s dealership laws.

Christie on Wednesday said he signed legislation allowing direct sales by manufacturers of zero-emissions vehicles. The law requires Tesla to maintain a service center in the state where consumers can have their cars fixed. The governor previously said he would sign such a bill.

The measure caps a yearlong struggle by Tesla and its supporters to allow the sales. New Jersey’s Motor Vehicle Commission voted unanimously in March 2014 to bar direct sales, a step dealerships said would protect consumers.

“We’re pleased that manufacturers like Tesla will now have the opportunity to establish direct sales operations,” Christie said in a statement.

Tesla currently has “galleries” in New Jersey, which refer would-be buyers to New York and other states.

Spokesmen for Tesla didn’t immediately respond to an e-mail seeking comment on the New Jersey law.

Tesla CEO Elon Musk has criticized the argument that dealers protect consumers from car manufacturers.

“Unless they are referring to the mafia version of ‘protection,’ this is obviously untrue,” he wrote in a post last year on the company’s blog addressed to New Jersey residents. “Consumer protection is pretty much the furthest thing from the typical car dealer’s mind.”

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Tesla free to sell cars in New Jersey as Christie signs bill
Tesla free to sell cars in New Jersey as Christie signs bill

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TrueCar Dealer Enrollment Hits All Time High

By: Auto Dealer Monthly

Third-party lead provider TrueCar added 840 net franchise and independent dealers in the first quarter of 2015, the biggest-ever volume gain in company history.

TrueCar's Certified Dealer network totaled a best ever 10,680 franchise and independent dealer partners at the end of the quarter, up 38% from a year ago, officials said. Active franchise dealers increased by 607 — the most for a single quarter — while the number of active independent dealers grew by 233. There were a total of 9,108 active franchise dealers as of March 31, while independent dealers totaled 1,572. Both figures are also record highs for TrueCar.

"This all-time record expansion is getting us closer to optimal dealer coverage across the U.S.," said Scott Painter, TrueCar's chief executive officer and founder. "Growing the TrueCar Certified Dealer network allows us to satisfy more consumers, more frequently in more places than ever."

With its cost-per-action business model, TrueCar isn't focused on signing up every dealer across the U.S. Instead, the company focuses primarily on dealer geographic coverage based on brands. TrueCar drives in-market car buyers to member dealers and asks dealer partners to pay for successful sales. As a result, the company's success is tied directly to its dealer partners selling more cars, officials said. TrueCar intends to continue adding dealer partners in geographic markets where it is underrepresented by certain brands.

"We appreciate our dealer partners' support and are pleased with the record level of dealer interest in TrueCar," Painter said. "Notwithstanding our growth in recent years, we're still in the early stages of building a national, consumer-facing brand. As a result, we look forward to helping our thousands of dealer partners nationwide be even more successful by sending increasing numbers of in-market car buyers to their dealerships."

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TrueCar Dealer Enrollment Hits All Time High

TrueCar Dealer Enrollment Hits All Time High

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