The Wall Street Journal reported that Uber has shut down its car leasing division in a quest to position the company for an IPO. A recent discovery in a review of the business operations found that the leasing division was losing over $9,000 per vehicle versus only $500 per vehicle that was previously calculated. After having invested over $600 million in the project aimed at helping drivers with poor credit attain a vehicle, the company decided the losses were enough.
The issue was apparently caused by a lack of upkeep and damage caused by drivers that were forced to work long hours to pay for expensive leases. The impact to the vehicles from neglect hurt the resale value of the cars in the aftermarket, forcing Uber to experience large write-downs as a result. Over 500 people were laid off as part of the operation shutdown.
Uber’s new CEO recently stated his goal was to achieve profitability and shoot for an IPO in late 2018 or early 2019. While the decision to shutter the leasing business predates his appointment, he made it clear they are looking to restore credibility and discipline in the business. The leasing business was for cars only and did not extend to the commercial trucking operations.
Uber Freight, from all outside indications, appears to be going strong and continues a rapid expansion. The team running the business are long-term trucking and logistics professionals and understand the freight business (including the super-hot spot market cycle). Uber Freight has separated itself from the other digital brokers in focusing on the driver and emphasizing that the service is meant to make the driver’s life easier versus just hauling freight.