Uber found a buyer for its Xchange Leasing division in Fair, a Santa Monica, California-based startup dealing in what it calls "flexible car ownership," The Wall Street Journal reported earlier this week, citing sources with knowledge of the development. The two are now said to be in an advanced phase of negotiations but the financial details of the deal remain unreported. The Xchange Leasing unit was previously valued at approximately $400 million but its 30,000 vehicles-strong fleet was already in the process of being auctioned off when Fair approached Uber with an offer for the business in fall.
The startup may not have to raise additional capital even if it's to pay close to the latest estimate of Xchange Leasing's valuation; following its establishment in 2016, Fair went through four funding rounds, two of which were led by BMW i Ventures, according to CrunchBase. Coupled with $16 million from Javelin Venture Partners raised this September and another billion generated through debt financing a month later, in addition to two other rounds that raised undisclosed amounts, Fair may have enough financial leeway to complete its biggest acquisition to date. The firm says its business model is based on a car-as-a-service concept and is quick to claim it's pioneering the segment. In essence, the company is providing consumers with the ability to lease vehicles online with no time constraints while also guaranteeing limited warranties, 24/7 road assistance, and regular maintenance services. Fair's app is presently only available on iOS but is expected to make its way to Android in 2018. The size of the startup's current fleet is unknown but is understood to at least double following the acquisition of Xchange Leasing's vehicle assets.
Uber confirmed its intent to offload Xchange Leasing in September and while it didn't provide many details on the matter, previous reports indicated that the division surpassed its estimated losses by 18 times, having most recently posted a deficit of $9,000 per vehicle. Originally established in 2015, the program was meant to provide affordable car leases to Uber's drivers with poor credit ratings but the unforeseen rate of damages ultimately prompted the company to liquidate the business. While Uber is presently amid a wider cost-cutting effort started under its new CEO Dara Khosrowshahi, plans to offload Xchange Leasing already began forming before Expedia's former chief took over the ride-hailing startup. Approximately 150 out of 500 employees of Xchange Leasing will reportedly be offered positions at Fair as part of the deal, while it's still unclear how many others will be relocated to Uber's other divisions.