Digital auto retail provider and auto finance underwriter Upstart will lay off about 365 employees, about 20 percent of its work force, the company said in a government filing Tuesday.
The publicly traded company notified employees the same day, according to spokesman Tom Brennan. Upstart expected to incur $15 million in severance and other expenses related to the layoffs, with most of that spending completed by the end of the first quarter, according to the filing.
The layoffs include staff in Upstart’s auto retail segment, which includes the Upstart Auto Retail platform created from its 2021 acquisition of Prodigy. It also includes Upstart’s indirect auto loan business, which uses artificial intelligence credit checks. Layoffs also arose in Upstart’s auto refinance arm, which involves similar AI underwriting.
But Upstart does not expect its auto retail, indirect or refinance operations to experience a major impact, Brennan said.
Earlier in the month, Upstart announced it would expand its indirect auto lending business to dealerships nationwide starting next quarter. It said it also would then allow dealerships using the Upstart Auto Retail platform the opportunity to let their customers obtain a car loan and even complete a purchase entirely online. Upstart today has about 800 dealership customers, about 30 of which had been piloting the indirect loan product.
“Auto lending and auto retail remain our biggest new areas of product investment,” Brennan said in a statement Tuesday.
He also said the company plans “to suspend development of our small business loan product until macroeconomic conditions improve.”
Brennan said Upstart’s head count fell to about 1,500 people, “which is similar to the number we had a year ago.” Upstart expects the layoffs to yield savings of $57 million over the next 12 months and $42 million more in stock compensation through 2025, it said in a government filing.
“In the current environment, where many lenders and credit investors have significantly reduced or paused originations, our cost basis no longer makes sense,” Brennan said. “As difficult as this decision was, it was necessary to allow us to return to profitability while continuing to invest in our future growth. We’re extremely grateful for the many contributions of those leaving Upstart.”
