TrueCar Inc. (Nasdaq: TRUE), a Santa Monica-based automotive pricing and information website valued around $210 million as of last week, has released more details about its acquisition of Irvine-based auto fintech company Digital Motors Corp.
The deal, first announced in May, didn’t include financial details initially, but regulatory filings earlier this month indicate that TrueCar acquired Digital Motors and its e-commerce platform for a total consideration of $21.8 million, including $15.5 million in cash.
The total price includes a portion of the $8 million in earn-outs Digital Motors could earn over the next three years as it meets certain milestones, TrueCar Chief Executive and President Mike Darrow told analysts in a conference call earlier this month.
Whether Digital Motors will receive the earn-outs depends on its delivery of product development and future revenue goals, filings indicate.
Hinrichs Staying
The acquisition calls for Digital Motors’ technology to assist with the rollout of TrueCar’s online marketplace, TrueCar+. The tool allows consumers to select a vehicle, and set up financing and insurance options, among other features.
Through the acquisition, “we gained new capabilities and deep expertise in fintech and automotive e-commerce that we believe will help accelerate our road map for TrueCar+,” Darrow told analysts.
That expertise, Darrow said, includes Digital Motors founder and CEO Andy Hinrichs.
Hinrichs’ knowledge “will be critical as
we continue to shift to an e-commerce focus with TrueCar+,” he added.
TrueCar generated $232 million in revenue in 2021, down 17% from the year prior. It counted some $200 million of cash and cash equivalents as of June 30, according to regulatory filings.
New Features
The combined forces of Digital Motors and TrueCar have already introduced new features to TrueCar+, such as the ability for dealers to sell vehicle protection products at the VIN level, and for potential buyers to order vehicles and begin the credit application process in a “streamlined” manner, according to company officials.
While TrueCar’s technology focuses on consumers, Digital Motors’ platform targets dealers, helping them push vehicle information out and transact online.
The acquisition enables Digital Motors’ technology to reach more dealers and consumers than it previously could.
“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 told the Business Journal in June, shortly after the deal was announced.
Weeks after completing the transaction, Digital Motors began powering the finance and insurance menus for dealerships on TrueCar+, Hinrichs said.
Consumer Options
Digital Motors isn’t aiming to render brick-and-mortar dealers obsolete by digitizing the process of car buying and selling.
“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.
Similar to “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.”
Local dealerships reported to have used the Digital Motors platform include 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.
Fintech Exec
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 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.
The company raised a reported $10 million in a Series A round last year.
