Survival Mode: Popular Car Rental Startup Kyte Makes Dramatic Cuts in a Major Market Shake-up
In a striking development that highlights the challenges facing innovative transportation companies, Kyte, the promising car rental startup once poised to challenge industry giant Hertz, has announced a dramatic scaling back of its operations.
The company is pulling out of most U.S. markets and cutting its workforce by half in a bold bid for survival.
CEO Nikolaus Volk revealed that the company will now focus exclusively on its two strongest markets: San Francisco and New York City (including Jersey City). This move comes as a surprise to many, especially considering Kyte’s ambitious expansion plans just two years ago.
“We have to focus on our strongest markets,” Volk explained, addressing the tough reality of today’s tight money situation. These two remaining cities aren’t random choices; they bring in about 70% of Kyte’s total revenue, making them crucial to the company’s survival plan.
The cuts run deep across the organization. The company has let go of nearly half its workers, with the heaviest hits falling on the engineering, consumer, and growth teams.
For customers in major cities like Atlanta, Chicago, Boston, Washington, D.C., Philadelphia, and Seattle, Kyte’s door-to-door car delivery service will no longer be available. Los Angeles customers recently learned their service will end after November 7.
This downsizing comes despite Kyte’s impressive funding history. The company secured $9 million in 2021, followed by a substantial $60 million Series B round in 2022. They also arranged major loans—$200 million from Goldman Sachs and Ares Capital in 2022 and another $250 million from Barclays and Waterfall Asset Management in March 2024.
The timing of this announcement is particularly noteworthy, as it reflects broader challenges in the car rental industry, especially for companies trying to modernize the traditional rental model.
Even industry giant Hertz has faced setbacks with its ambitious electric vehicle plans, managing to acquire only 35,000 Teslas out of a planned 100,000 before selling most of them this year.
Looking ahead, Kyte aims to reach profitability within the next 18 months—a goal that Volk believes is achievable with this more focused approach. While the company did consider selling, they ultimately chose restructuring as their path forward. Volk also mentioned a recent funding round to support the restructured business, though the amount remains undisclosed.
Kyto’s cautious approach to electric vehicles is a positive aspect of this situation. Unlike some competitors who invested heavily in EVs and faced losses due to falling residual values, Kyte maintained a more traditional fleet mix. This conservative strategy may have given them the flexibility needed for this restructuring attempt.
For customers in San Francisco and New York City, Kyte’s service will continue as usual. The company plans to focus on improving its operations in these key markets while working toward sustainable growth.
This development serves as a reminder that even well-funded startups must sometimes step back to move forward, especially in challenging economic conditions.
Kyte’s restructuring story mirrors a wider trend in the transportation industry, as companies prioritize profitability over rapid expansion. As the market continues to evolve, it will be fascinating to see if Kyte’s strategic retreat proves to be the right move for long-term survival.