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Uber
Car-hailing company Uber has cut fares in 48 cities across the US starting today and has offered its drivers a guarantee that the cuts won’t eat into their earnings.
Uber, whose app connects those looking for a ride to drivers who’ve signed on with the service, expects lower demand during the winter months, and lowering prices is one way to counter any drop.
“As things slow in the winter season, we will be reducing prices in 48 of our newer Uber cities to achieve better outcomes for both riders and drivers, as we have seen in cities around the country,” Uber said in a blog post.
San Francisco-based Uber was first established as a luxury service but eventually branched out to offer lower-priced “everyday” services as well, letting it compete with traditional taxis. In its five years of existence, the company has gone from nascent startup to one of the most talked about tech companies. Last year, it raised more than $2.4 billion in funding, giving it a valuation of at least $41.2 billion. But it was also the center of several controversies: drivers protesting price cuts, passengers complaining of a secretive rating system and regulators around the world vying to shut down the service. Uber also continued to war with its ride-sharing rivals and the taxi industry.
In the past, Uber has employed a strategy of lowering prices to drum up more business. In June 2013, the company reduced prices in San Francisco on its basic, UberX service to 10 percent lower than that of taxis. And in January of 2014, it cut UberX prices by more than 15 percent in Chicago, San Francisco, Seattle, Los Angeles, Phoenix and other cities. The company didn’t specify what the current rate reductions would be.
In its blog post, Uber pointed to earlier price cuts it’s made in other cities and said cuts benefit not just riders but drivers. Riders save money on each trip, leading to greater demand for Uber’s services; and greater demand generates more trips, which potentially means more money for drivers, the company said.
In a blog posted last October, Uber also pointed to stats that showed driver wages in New York City going up over the past three years at the same time that fares went down. And more recent data from Chicago showed that fares are 23 percent less while drivers are making 12 percent more in wages each hour, according to the company. Uber did not publish data showing a correlation between price cuts and driver wages for other cities.
The 48 cities receiving the new fare decreases include Atlanta, Baltimore, Dallas, Miami, Sacramento and San Diego. There’s a full list here.
“We expect that these seasonal price cuts will help bring newer Uber markets in line with our larger ones with lower costs for riders, higher earnings for drivers, shorter wait times for both, and a better experience for all,” Uber said in its blog.
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The company also said it’s guaranteeing minimum fares for drivers in the cities where it’s reducing rates. That means that for each hour spent logged on to the Uber platform, each driver will make at least $x/hour, (The x varies by city and day of the week/time of day.) If drivers don’t hit that minimum per hour, Uber will make up the difference, according to an Uber spokesperson.
There are a few conditions, however, the spokesperson said. To get the guaranteed earnings, drivers must be online with Uber for 50 minutes of every hour worked, accept at least 90 percent of all ride requests and average at least one trip per hour.
That might make it difficult for Uber drivers to work simultaneously for competing ride-hailing services, such as Lyft. Getting and keeping more drivers is key for both companies because it means more people on the road picking up passengers and creating a bigger name for the service. In the past, Uber and Lyft have accused each other of trying to poach one another’s drivers.
Drivers are upset about today’s Uber cuts, said Harry Campbell, who runs a blog about being a driver in the car-hailing industry, but he doesn’t see it as the end of the world, especially if it actually results in more passengers. “There are a lot of drivers out there who may feel that these rates are too low but there are also a lot of drivers out there who are going to make the best of the situation and figure out a way to persevere and work smarter, not harder. I know I am,” he wrote in a blog post Friday.
CNET’s Dara Kerr contributed to this report.
