The latest drama in Uber-land? The startup is shutting down its car leasing scheme after it was leading to massive losses for the company.
Uber executives reportedly told The Wall Street Journal that the average loss per vehicle was 18 times more than they had thought. The losses amounted to about $9,000 per vehicle.
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However, this will affect the startup’s US drivers which all hold leases for the vehicle they drive.
Named Xchange Leasing, the subsidiary of Uber had operations in cities across the US, including Los Angeles.
It offered short-term leases to drivers by partnering with dealerships, such as Ford and Nissan.
It was beset with problems from the start. The costs for drivers were thought to be significantly higher than other leasing programmes. Consumerist reports that Experian’s average weekly payment for a new car lease is $96, yet a 2013 car leased through Xchange cost around $130.
Why is Uber Xchange Leasing being shut down?
There were rumours back in August that the subsidiary would be shut down as a result of the costs, however, it looks like Uber’s new chief executive, Dara Khosrowshahi, has sped the process up.
He has said he wants the startup to “pay the bills” ahead of a potential IPO in the next 18 months. It’s well known that Uber is running at a loss: it reported losses of about $2.8bn in 2016.
When Uber Xchange Leasing is shut down, it is though about 500 staff will lose their jobs. This amounts to three percent of the startup’s workforce.
How will it affect Uber drivers in the US?
Uber Xchange Leasing has approximately 40,000 vehicles in the US and 14 cars in showrooms.
When it was rumoured Xchange Leasing would be closing a few weeks ago, a former Uber driver got in touch with Verdict, claiming she had been lied to about the terms of her agreement and was promised higher earnings.
The source, who goes by the Twitter handle @ExposeUberNow, was a former Uber driver from Sacramento, California.
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She told Verdict:
I was told around $1,500/week (via online ads). In the Sacramento market, I worked from about 7am-10pm and would make about $100/day before expenses.
She said she is being chased by creditors and has moved to Uber rival Lyft in order to use her earnings to pay off the Uber fees.
I don’t feel people care to look at what’s being done to drivers. All they care about is getting $3 rides across town.
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