Uber in September announced it was closing Xchange Leasing, a subsidiary launched roughly two years earlier to lease vehicles directly to drivers. The venture was a massive failure as Uber was losing around $9,000 per car on average – far more than the $500 or so previously estimated.
Uber is selling its money-losing auto-leasing business to the startup Fair.com, unnamed sources have told The Wall Street Journal.
Fair is a car marketplace cofounded by industry vets Scott Painter, the former CEO of TrueCar, and Georg Bauer, the former VP of finance at Tesla and BMW. Fair is trying to change the car-leasing industry by allowing people to lease cars based on how much money they are willing, and qualified, to spend, and then letting them return the car anytime they want with five days notice. Everything from the approval process to the car shopping to the payments is done through an app.
Terms of the deal were not disclosed and neither party immediately responded to Reuters’ requests for comment although as part of the deal, Uber will reportedly take an equity stake in Fair and offer access to the service via its app.
The Xchange Leasing business had more than 30,000 vehicles in its inventory according to documents prepared for prospective buyers. The estimated value of the vehicles is around $400 million, we’re told.
Uber partnered with select automakers including General Motors and Toyota in late 2013 to launch a leasing program in the US. A few years later, however, Uber decided to cut out the middleman and lease directly to drivers through the Xchange Leasing program.
Uber is undoubtedly looking to put its tumultuous 2017 in the rear view mirror. The company was plagued by scandal and saw its co-founder and CEO ousted mid-year. Former Expedia chief Dara Khosrowshahi was hired to replace Travis Kalanick in late August.
Sources report, at the time of the sale, Uber had about 30,000 cars in the program worth about $400 million. But, as part of the deal, Uber will take a stake in Fair and the startup will become an exclusive partner with Uber, offering drivers the ability to lease cars. Fair will also employ 150 people out of the Uber unit that once employed 500.
These deals mark a major shift of Uber’s attitude toward taxi companies, at least in that part of the world, attempting to view them as potential partners instead of as arch enemies.
Per sources, Uber has been looking for a buyer since it decided to close the unit down in August. The company never expected to make money on the program, it said, but it was losing far more money than anticipated. It expected to lose about $500 per car but was losing about $9,000 per car.
Drivers leased the cars, with the payment deducted from their earnings, and were allowed to return them easily. But to make a living with these cars and pay for them, they drove the cars hard and often returned them in poor condition.
Uber has been trying to clean up its balance sheet after losing about $2.52 billion in the last two quarters as it marches toward a potential 2019 IPO.
With this deal, Fair stabilized its place as startup to watch, too. It attempted to acquire Beepi last year, a startup that raised $150 million for an exclusively online used-car marketplace, but the sale fell through and Beepi was shut down. In October, Fair said it raised over $1 billion between venture investment and loans. Investors include BMW’s iVentures, Penske Automotive Group, and Mercedes Benz.