Amid other well-known issues over the past several months, Uber may be shutting down its car leasing program in the United States. With a two-year test run, the ride-sharing company has realized the idea to lease cars to its drivers may not be as profitable as originally thought.
According to reports from the Wall Street Journal, “The average loss per vehicle was about 10 times what they had thought.” This could be translated into the company losing around $9,000 per leased vehicle, which is a drastic difference between the estimated $500 loss they were anticipating.
Uber also apparently invested upwards of $600 million into its domestic leasing program, expanding its horizons to 24 various markets. Although they’re being criticized for their lack of preparation in this area, they have also been under fire for reports of unsafe vehicles being leased to drivers in Singapore.
Uber conveniently gave drivers the ability to lease a car on their behalf for a little more than most people would usually pay, but the plan wasn’t as well though out as it was thought to be initially. Although they would receive more revenue from increasing the leasing rates, they didn’t consider that in order to meet the monthly quotes, drivers would take more fares using those vehicles.
In theory, this meant more profit for the drivers and for Uber, but with more fares, the wear and tear on the vehicles was a disastrous side effect. Uber then was responsible for the repairs of these vehicles and the dramatic drop in value if it were to resell the vehicles later on.
In order to recover from the deficit, Uber is considering selling some of its Xchange assets and reducing the number of cities it serves in the upcoming quarter.
The end of Uber’s leasing program may be the least of its troubles, as the company is still searching for a new CEO. With Travis Kalanick peeking through the blinds, the direction in which Uber may be headed is still uncertain for now.