Uber has been trying in recent years to drive as much growth as possible, but it hit a wall in 2017. In an effort to cut its losses and eliminate wasteful parts of the business, the company decided to sell off its subprime car loan business, according to a report from The Washington Post. The loan program was said to be costing Uber hundreds of millions of dollars, not to mention drawing criticism from those who say the company exploits drivers with bad credit histories.
Uber’s auto loans, offered by its lending unit Xchange, were intended to attract drivers. New members were able to make one $250 deposit up front, with future loan payments being deducted from their earnings weekly after that. In exchange, people who otherwise wouldn’t have had access to cars were able to become drivers.
Uber was optimistic when it launched the program in 2015, but it soon ran into trouble. Xchange began targeting risky borrowers, and a Wall Street Journal investigation also found that the ride-sharing business was losing approximately $9,000 per car.
For Dara Khosrowshahi, the newly-installed chief executive at Uber, selling off the loan business represents a more disciplined, cost-cutting approach to running the organization.
“It looks like Dara is running the business somewhat more [responsibly], focusing on cutting back the losses, focusing on profitability,” University of Maryland finance professor David Kass said, according to the Post. “Uber needs to run a tighter ship to get ready for their [initial public offering], if they are [planning] one for 2019.”
Bloomberg estimated that Uber lost more than $2 billion during the last two quarters of 2017, and the unsuccessful loan venture was responsible for a chunk of that. The loans were problematic because they encouraged drivers to work longer shifts, which hurt morale and put excess wear and tear on the cars, lowering their value.
Uber’s previous executive, Travis Kalanick, embraced the program because it exemplified his “growth at all costs” strategy. Moving forward, the company appears poised to focus on smarter growth, not necessarily more.