Uber will no longer offer car leasing in the U.S., according to an official statement from the company. Uber Technologies will be closing down this part of its business. The reason for the closure is that this segment of the business was making huge losses that made it unviable to continue running it.
Xchange Leasing closure will impact 500 jobs
Uber's car leasing division is known by the name Xchange Leasing. The division currently employs some 500 people, which makes up some 3% of the brand's total employee base. Uber officials have started telling Xchange Leasing employees about the shutdown of the business division this week and kick-started what will be the brand's biggest mass layoff since its launch.
Moving away from capital-intensive approach
The company has made it clear that the division's non-profitability is the main reason behind the shutdown decision. The company's management came to this decision after the numbers revealed that the car lease division was losing 18 times as much cash for each car leased out as it had been expected. Costs were soaring sky high and Uber books showed a whopping $4.4 billion loss over the past six quarters. As the company gears up for an IPO in the next year and a half, it is imperative for it to plug gaps from where cash is going out of the coffers and this business division seems to be the first and most obvious choice. Officials have also indicated that Uber will now be more focused on initiatives and existing businesses that have a less capital-intensive approach. Earlier, it was hoped that the brand would be able to sell off this portion of the business but it appears as though buyers were not forthcoming to bid for this division. This has forced the hand of Uber management to get rid of the division completely.
Uber has announced that it plans to honor the leases that remain current, for now. Most of these leases come with a three-year term, so, this could be the maximum term that Uber lease vehicles may be seen. In addition to these, Uber also has several vehicles that it holds under title. As of now, none of these decisions affect the company's leasing business in southeast Asia. It is expected that it will be business as usual here, for the time being at least.