Rental car startup Kyte, once touted as the "best alternative to Hertz," is drastically scaling back its US operations and slashing its workforce by 40-50% in a bid to achieve profitability within the next 18 months. The company will now focus solely on San Francisco and New York City, exiting major markets like Atlanta, Chicago, Boston, Washington D.C., Philadelphia, and Seattle.

According to CEO Nikolaus Volk, Kyte's strongest markets, San Francisco and New York City, account for approximately 70% of the company's revenue. The decision to retreat to these core markets was made to prioritize profitability in a capital-constrained environment, where capital is "super expensive."

The company had previously raised $9 million in 2021 and $60 million in Series B funding in 2022, with plans to become the world's largest operator of shared, electrified, and autonomous fleets. However, the unit economics of Kyte's business did not generate sufficient free cash flow in its expanded markets, prompting the company to explore a sale before opting for restructuring.

Kyte's struggles are reflective of the challenges faced by the rental and subscription car service space, particularly those that have heavily invested in electrification. The company's decision to scale back its operations and focus on its core markets may be a necessary step towards survival, but it also raises questions about the viability of its original business model.