TrueCar Inc. may soon be one of the new hot Nasdaq stocks of the year. The private company is set to make its initial public offering (IPO) soon, seeking to raise around $125 million for corporate expenses. TrueCar is an “online auto-shopping service” much like established websites such as Cars.com and AutoTrader.
On May 3rd, TrueCar named John Krafcik the new president of the company, shortly after he was named to the board of directors. Krafcik is the former CEO of Hyundai North America, and TrueCar is hoping he can bring his directorial prowess to their company in its proceedings to become public. As AutoBlog reports, “John Krafcik not only has a deep understanding of the automotive industry, but he also knows how to run an organization at scale – and the timing is right for him to join our team,” says Scott Painter, founder and CEO of TrueCar. In his tenure at Hyundai, Krafcik was able to increase market share at the company by more than 50 percent in North American markets.
While adding Krafcik to the team is undoubtedly a successful move by TrueCar, it certainly appears that they could have done just as well without their new president. TrueCar posted a 68 percent increase in revenue last year which brings it up to $134 million. The company creates a majority of its revenue from connecting customers to dealerships, taking a small amount of the sale, usually $300-$400, as its commission.
While the Microsoft-backed company is certainly not the only player in its market, it is a dominant force. TrueCar was responsible for 3 percent of new car sales last year. It certainly appears that TrueCar and its fellow players have found their way into the future of auto sales. It is becoming more and more evident that there is a trend towards customers finding the exact car they want online rather than visiting a dealership to browse their limited stock. If the trend continues, this could spell the demise of physical dealerships and the rise of direct sales to consumers, much like the Tesla model. New and used car sales can become much more efficient if every used car on the market were sold through large online databases stored by companies such as TrueCar and AutoTrader.
While questions about the future of auto sales remained unsolved, one thing is for sure: TrueCar IPO is soon to be all the rage on Wall Street.
– Zac Durkin