Uber is shutting its lossmaking car leasing business Xchange Leasing, which bought cars and loaned them to drivers unable to purchase their own.
The car-booking app company confirmed in a statement that it was backing away from establishing a fleet of cars: “We have decided to stop operating Xchange Leasing and move towards a less capital-intensive approach.”
The Wall Street Journal reported that Uber was losing about $9,000 on each of the 40,000 car titles held by Xchange Leasing, rather than the $500 the company had expected. It added that about 500 jobs would be affected.
Uber declined to comment on the figures.
Xchange Leasing opened in 2015, drawing on a $1bn credit facility as Uber sought to widen its pool of drivers, who can also rent cars from the company. Many of the drivers who used the programme had very poor credit that disqualified them from regular car leasing programmes.
The leases were offered in 10 US states and international locations including India. Uber had also opened 14 showrooms in the US.
Andrew Macdonald, a vice-president at Uber, tweeted that closing Xchange “was a tough decision”, adding: “Not every big bet we make is going to work.”
The move is the latest effort by the seven-year-old company to reduce the steep losses that have accompanied its rapid growth.
In July, Uber exited the lossmaking Russian market by merging its operations there with Yandex Taxi. The company has also explored selling the landmark building it bought for $120m in 2015, which was to have housed its new headquarters in Oakland.
While Uber’s losses have narrowed this year, investors believe that further streamlining will be necessary to get the company ready for an initial public offering.
It lost $654m in the second quarter of this year, compared to $708m in the first quarter, excluding the costs of interest, tax, depreciation and stock-based compensation. Net revenues in the second quarter, which represent Uber’s cut of fares, were $1.75bn.
Uber’s leasing business had also fallen foul of US regulations.
This January, Uber agreed to be fined $20m by the US Federal Trade Commission, which accused the company of overstating how much drivers using its vehicle finance programme could expect to earn. Uber did not admit wrongdoing.
Uber’s decision to close Xchange comes as it fights to retain its licence in London, after the city’s transport authorities announced it would not be renewed.
It also comes just three weeks since Dara Khosrowshahi, ex-chief executive of travel company Expedia, took up the reins at Uber.
His hiring concluded a drawn-out search to replace founder Travis Kalanick, who stepped down amid sexual harassment scandals at the company.