Uber, GM, and Toyota Team Up on Car Finance

Cadillacs for everyone! Or at least cheaper loans to buy Cadillacs with.

Photo by Karen Bleier/AFP/Getty Images

Uber announced a new initiative Monday in partnership with GM and Toyota to help would-be buyers of Uber vehicles to get discounted loans to buy cars. The basic logic is that a loan to purchase a new Uber car should be seen as a less risky loan than a conventional auto loan, since the vehicle comes with an income stream attached to it.

The idea is basically that Uber itself will certify what it calls “driver-partners” in select cities (they’re starting with San Francisco, Dallas, Chicago, New York, Philadelphia, and Boston) who want to buy GM or Toyota cars and will get them eligible for lower interest loans. Uber’s publicity push for this new program does not involve telling people which banks, if any, are part of this arrangement or any hard numbers, so it’s difficult to say for sure what this amounts to.

The business logic, however, is fairly persuasive. For Uber to work, there need to be a lot of available cars on the road. As the service grows in popularity, you could achieve that goal by raising prices, which will both tamp down demand and tempt more drivers onto the road. But while higher prices also grow Uber’s short-term revenue, for longer-term growth it makes more sense to try to find ways to keep prices relatively low. That means identifying as many supply bottlenecks as possible and moving to eliminate them—with the price of the underlying hardware a perfectly reasonable bottleneck to target.

This is also an interesting demonstration of the dilemmas of the modern day “weightless” financialized American company.

One possible application for Uber’s routing technology and customer service would have been for Uber to own a fleet of cars and employ an army of drivers. If that were the business model, that growth in Uber revenue would finance growth in fleet size, and you wouldn’t have this problem. But in part for regulatory reasons and in part for financial reasons, Uber wants to minimize the amount of capital goods that it owns. The vision is for Uber to be a high-margin, effortlessly scalable business that sits at the center of a web of low-margin, capital-intensive car driving enterprises. But ultimately Uber is tied to the fate of the people who actually own the vehicles. Uber’s funders may not want to directly invest in a vast fleet of automobiles, but unless someone invests in the fleet, the business won’t grow.