Ending a tumultuous year that included big losses, ride-hailing giant Uber is nearing the sale of its auto leasing business, which might have cost it hundreds of millions and has received criticism for the exploiting of drivers who have poor or no credit histories.
The unit, Xchange, will be sold for an unknown amount to Fair, a startup that specializes in car lending, according to a report released by the Wall Street Journal.
A source in the industry familiar with the ongoing negotiations and spoke only after being promised anonymity, confirmed that Uber was trying to sell the business.
Experts said this move is a signal of a disciplined, cost cutting approach that the new CEO Dara Khosrowshahi has established as he attempts to take the company public over the upcoming two years while trying to repair the relationship Uber has with both its own drivers and the overall public.
The leases Xchange offered were set up to attract more new drivers to Uber. Needing only an upfront deposit of $250 and payments weekly that were directly deducted from earnings with Uber, the leases were pushed by Uber as alternatives to those drivers who otherwise would not have access to owning or leasing a car.
However, as well as targeting the risky borrowers, the lease programs, which was launched in 2015, was much more costly than was expected by Uber.
Uber lost almost $9,000 per vehicle, which was 18 times more than the $500 estimated by the company. The loan payments encouraged drivers to work long shifts that put more wear and tear on the vehicles, lowering the resale value for each, said the report.
Under terms of the proposed deal, Uber would hold an equity stake in Fair, while potential drivers would be given access to Fair through Uber’s app.
Citing figures at Uber obtained for the WSJ report, it was estimated that the leasing program might have cost as much as $270 million. During the most recent two quarters, Uber lost over $2 billion.
Under its prior CEO Travis Kalanick, the internal operations and culture of Uber were characterized often as having a growth at all cost mindset. However, that type of aggressiveness prompted much backlash.
While the ride-hailing company positioned the loans for the vehicles as a pathway for the underserved borrower, it led to many critics questioning if the company held another motive.
With one theory being it could be perceived as a form of indentured relationship between drivers and Uber.