Uber has confirmed it is shutting down its U.S. auto-leasing business known as Xchange Leasing, which will affect about 500 jobs.
According to a news report in The Wall Street Journal, the move comes months after Uber executives found out it was losing 18 times more money per vehicle than previously thought. The decision to shut down the business is an indication that the ridesharing company was unable to find a buyer.
Shutting down Xchange Leasing will impact about 3 percent of Uber’s 15,000-employee staff, and is Uber’s first mass layoff in its eight-year history.
“We have decided to stop operating Xchange Leasing and move toward a less capital-intensive approach,” said a spokesman.
The company started the car leasing division about two years ago under former Uber CEO Travis Kalanick, investing about $600 million in the business. It was able to offer leases to new drivers whose spotty or nonexistent credit histories prevented them from getting their own vehicles, and eventually expanded the division into 24 U.S. metro areas, including 14 branded showrooms, and raised a roughly $1 billion credit facility from a consortium of banks.
But despite rates of more than $500 a month, the company has struggled to control losses at Xchange Leasing. The high lease fees pushed many drivers to work longer hours and return the vehicles in poor shape, damaging their resale value. And the company allowed drivers to return vehicles with just two weeks’ notice after the first month and didn’t restrict mileage, unlike traditional leases.
In July, Uber executives discovered the unit was losing around $9,000 per vehicle, compared with previous estimates of just $500. The company has been working to cut costs after posting at least $4.4 billion in total losses over the past six quarters, particularly as its new chief executive, Dara Khosrowshahi, is looking toward an IPO in as little as 18 months.
The company plans to honor the existing leases, but it is unclear what Uber will do with the vehicles it holds under title. Uber is expected to continue its vehicle-leasing operation in southeast Asia, known as Lion City Rentals Pte Ltd.