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Tuesday, September 16, 2014

UberX rates drop again: Effective September 15, 2014

On the Uber passenger app, UberX rates were slashed 13.33 percent. Previously, clients paid $1.50 per mile and .30 per minute, on top of $3 base fare, $1 per safe rides fee, and minimum fare was $6.

With the new UberX price reductions, now clients are saving 13.33 percent:
  •  $1.30 per mile
  • $.26 per minute
  • $2.30 base fare
  • $1 safe rides fee
  • $5 minimum fare
If we calculate this price reduction in a longer trip, a client will pay $83.80 for a 50 mile ride that takes an hour to complete. On the old pricing, the cost of this trip would amount to $97. Back in December 2013, this exact same ride on the Lyft once cost $100. 

Do you see the difference in cost? Are you actually going to earn more with this price reduction? How many more price reductions are required to make clients happy? Does Uber really need their UberX platform to be 40% cheaper than a taxi?

Do hotels keep slashing their prices until they are motels? No. Quality sells a service. It is not the price that drives up demand. Do people prefer to stay in cheap rooms? Maybe. Will people pay higher prices for quality service? Yes. 

Every time Lyft reduces their fares, it seems that Uber follows suit. Lyft uses a slider to start and stop rides. Uber adopts the same update. We are seeing Facebook and Google+ competition. When will this price war stop? Clients have preferences. It is not all about price. Passengers still take taxis. 

As of this moment, UberX is cheaper than Lyft. Lyft currently charges $2.25 for pickup, $1.35 per mile, $.27 per minute and $5 minimum ride. They also charge a $1 "Trust and Safety fee" to riders on all trips.

Is this price reduction fair for UberX drivers who operate luxury vehicles? Implementing low prices and eliminating the $1 safe rides fee will impact luxury driver owners on the UberX platform. 

Will there be enough UberX drivers to accept increased demand for cheaper rides? Last year, Lyft drives were unable to rider demand, and actually missed out on 30% of all requests during busy weekend nights.  

Should quality remain the focus of ridesharing services? What can drivers provide their clients? Any unique features inside rides? Charging stations? Good music? Ability to play personal music? Water? Snacks? If drivers feed the demand, they will be working for minimum wage. 

Can UberX drivers withstand another price reduction? It is like an employee who makes $20 an hour getting a pay reduction down to $14, but overtime is available to make up this difference. This worker would must to work overtime to make up for pay lost in this reduction. Reducing prices will require drivers to make additional trips, increase mileage, work more hours, and deteriorate their vehicles. 

A SideCar trip from the Apple Store to the Old Navy flagship store now cost $8-10. In the past, a driver could make decent money taking this trip. Unfortunately, Lyft lacks a fare quote option on their ridesharing app to calculate fare estimates. However, UberX features a fare quote option to estimate ride cost. A trip from Apple Store on Chestnut to Old Navy Flagship store is estimated to cost between $8-$11, depending on traffic conditions. For the most part, clients/riders/passengers enjoy fare quotes to make trip decisions. 

Price reductions will undermine ridesharing because drivers must offset these low fares with extended hours. Surge pricing may not always apply to rides. UberX drivers can't always expect a 2x-3x trip. Clients are intelligent enough to avoid surge pricing, unless they have no choice but to take this trip. In the East bay, many clients shared that they dodge surge pricing. Back in the Spring, clients were more willing to accept surge pricing than now. 

Hopefully, ridesharing companies can stop lowering their prices. Price reductions are not increasing the supply of vehicles. Fortunately, SideCar drivers can set their own rates. If these rates are set fairly, passengers will request these drivers. UberX is equivalent in price to SideCar. Based on fare metrics, Lyft is the most expensive ridesharing service in San Francisco. 

A word of advice is to focus on quality and stop reducing prices. There is a bottom line to these price reductions. If drivers continue to see price reductions, this will impact their earnings and reduce the supply of quality vehicles. With these price reductions, drivers must work more hours and give more rides to make up the difference. 

Happy Ridesharing!