But TrueCar has advantages that could soon give the stock some steam. The company charges car dealers a fixed $300 per vehicle sold through its referral service. That is a fraction of the advertising cost many dealers need to lay out to attract each customer. While most TrueCar-affiliated dealers still advertise heavily, they should soon be able to scale back as TrueCar referrals become a bigger percentage of sales.
Indeed, one large BMW dealership in New Jersey told CNBC it sells about 25 percent of its cars to customers who used TrueCar. That's up from about 10 percent just one year ago, the dealer said.
There's plenty of room for other dealers to do more business through TrueCar. Last year, TrueCar transactions accounted for less than 3 percent of all new vehicle sales in the U.S.
The company's progress is apparent in its sales growth. TrueCar's revenue rose 75 percent in the first quarter, with the vast majority of that growth coming from higher sales at existing dealerships.
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The rest of the growth is due to new dealership additions, which have plenty of scope to continue. At the end of March, the company had 7,210 dealerships. At an investor presentation, the company said it can comfortably reach 11,000 to 12,000 domestic dealerships, according to a shareholder.
Overall car sales should also continue apace for some time. After the financial crisis, many consumers put off car purchases for two or three years, suggesting there is pent-up demand. Sales levels have only recently returned to precrisis levels of around 15 million new light vehicles per year, versus levels around 10 million in the crisis.
Skeptics may argue that competitors can simply replicate TrueCar's model and win dealerships by charging less. But it has taken the company several years and more than $100 million to develop technology and cultivate relationships with dealers. Local laws concerning car sales can vary drastically, making it time consuming to establish new dealer relationships.