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Thursday, Apr 18, 2024

Auto Fintech Co. Digital Motors Bought by TrueCar

2nd OC auto startup for Hinrichs

It’s life in the fast lane for local automotive fintech exec Andy Hinrichs.

Digital Motors Corp., the Irvine-based auto platform that Hinrichs co-founded in 2018 and launched in March 2020 at the onset of the pandemic, announced earlier this month it was being acquired by TrueCar Inc. (Nasdaq: TRUE), a Santa Monica-based automotive pricing and information website valued around $260 million as of last week.

Terms of the sale were not immediately disclosed. The deal is expected to enhance and accelerate the rollout of TrueCar’s online marketplace, TrueCar+.

The TrueCar+ tool allows consumers to select a vehicle, and set up financing and insurance options, among other features. The Digital Motors platform, meanwhile, is aimed at dealerships. It helps dealers not only push vehicle information out, but also transact; the firm says it offers a highly customizable “holistic, end-to-end buying experience” that allows consumers to browse cars, structure monthly payments, and go as deep into the car-buying process as they wish online.


Adding Scale

“With its existing dealer network, millions of consumers visiting [the company’s] properties every month and huge network of affinity partners, TrueCar really brings substantial scale to the technology that Digital Motors has built,” Hinrichs, Digital Motor’s CEO, told the Business Journal.

At the same time, Digital Motors “can accelerate the roadmap of TrueCar by bringing certain technology and expertise to the table.”

TrueCar generated $232 million in revenue in 2021, down 17% from the year prior. It counted some $235 million of cash and cash equivalents as of March 31, according to regulatory filings.

Make Darrow, president and CEO for TrueCar, said last month prior to the deal being announced that his firm was looking for “smart tuck-in opportunities with innovative technology and talented know-how and capabilities.”


First Integrations

Eager to combine forces, both Digital Motors and TrueCar worked to complete the acquisition within just a few months.

“It was a very efficient process on both sides of the table,” said Hinrichs, who says he is remaining as a TrueCar senior vice president responsible for Digital Motors.

“I think both parties saw the synergies of the deal and were motivated to get it done.”
The integration of both companies has been as speedy. Just a few weeks have passed since the acquisition and Digital Motors is already powering the finance and insurance menus for dealerships on TrueCar+, Hinrichs said.

“We’re now able to cater comprehensive finance and insurance menus that are tailored to each individual dealer that onboards with TrueCar+.”

“The first synergies [of the deal] have already been realized.”


Broadening Options

Prior to founding Digital Motors, Hinrichs was the co-founder and former chief executive of fellow Irvine automotive fintech startup AutoGravity Corp. Prior to that, he held exec roles with Daimler Financial Services and Mercedes-Benz Financial Services USA.

Hinrichs earned a Business Journal Excellence in Entrepreneurship Award in 2018 while with AutoGravity, which at the time had raised about $80 million in funding, making it one of of OC’s fastest-growing fintech firms.

He left the company shortly after that, and started Digital Motors with other ex-AutoGravity execs, including Chief Operating Officer Nicholas Stellman.

Getting acquired wasn’t the end goal Hinrichs had in mind when he founded Digital Motors.

The plan “was just to build awesome technology, assemble an awesome team and then see what the future holds,” he said.


Pandemic Push

The future arrived fast. Digital Motors initially planned to launch its platform in summer 2020, but that was expedited by the pandemic.

“All of a sudden, online car sales were really a thing,” Hinrichs said.

In modernizing the car buying and selling experience, Digital Motors isn’t aiming to render brick-and-mortar dealers obsolete.

“We don’t want to create a competition to the traditional car buying experience. We want to augment the physical presence of the dealership with a digital storefront that allows the respective parties to transact in a seamless fashion,” Hinrichs said.

“Like with Apple Inc., you can buy stuff online, you can buy it at the mall or a hybrid of the two processes. That’s not dissimilar to how we view the automotive landscape.”

Digital Motors raised a reported $10 million in a Series A round last year.


Orange Coast Partner

Local dealerships reported to have used the Digital Motors platform include Jon Gray’s Orange Coast Auto Group in Costa Mesa.

The owner and general manager of the Chrysler, Dodge, Jeep and Ram dealership is said to be among the top 5% of Fiat Chrysler Automobile dealerships nationally.

The “asset-light” approach of Digital Motors and TrueCar allows not only consumers but also lenders, dealers and manufacturers the luxury of choice.

“TrueCar can present a vast array of vehicle inventory and make that accessible to the consumer, without having to own all the assets by partnering with dealerships that already own all of the vehicles and inventory,” Hinrichs said.

Adding Digital Motors’ sales and financing experience onto that creates an asset-light model that can be “[scaled] very efficiently and offer a lot of choice for the participating parties.”

“We don’t want to dictate the consumer…we just want to enable more options than traditionally existed.”

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