Uber’s strategy of slashing fare prices entered another round, with 48 cities across the United States getting seasonal cheaper rides, in the same time offering their drivers the guarantee that this will not affect their earnings.
Uber, whose application connects people searching for a ride to drivers that signed up with the company, started in San Francisco as a luxury service. They changed their vision to reach more people and offered rides at a lower price. In just five years Uber grew to a value bigger than $40 billion, making it one of the most popular tech businesses, although it has spiked many controversies with its protesting drivers and a continuing war with the taxi industry. Only last year, the company has risen $2.4 billion in funding.
In its blog Uber explains that this tactic will help bring in more clients, this way increasing earnings for drivers while decreasing rider’s cost and in effect both driver and client’s waiting will be shorter. In another blog post from October, the car-service company explained how in New York, driver wages have risen in the last three years as the fare prices continued to go down and in Chicago, though the prices went down by 23 percent, drivers were making 12 percent more.
Drivers in the 48 cities got upset about the cheaper fares, but if Uber’s view on this tactic will have positive results, it will bring more passengers, more rides and more money in their pockets. Even if drivers will not make the hourly earnings as promised to them, the car-hailing company is prepared to make up the difference. Drivers are independent contractors and the car-service company cannot require them to work exclusively for it.
Just a year ago, Uber started the war on competitors, especially Lyft, by cutting into the costs of fares in many cities and also slashing its driver commission from 20 percent to 5 percent. It is well known that many drivers are using more than Uber’s platform to get fares, so in order to be ahead of the competition, Uber came up with a tactic of offering the drivers guaranteed hourly earnings anywhere between $10 and $26, depending on the city and hour.
In order for the drivers to get that amount they have to accept 90 percent of the rides and, out of 60 minutes, to be online Uber’s platform for at 50 minutes, thus making it impossible for them to pick up fares by switching to other platforms.
Lyft also tried the same strategy in August raising its commission on fares up to 20 percent and giving it back to drivers that would only work for the company certain amount of weekly hours and accepted at least 90 percent of the rides.
Uber announced its drivers on its blog, that only during the winter season, as the things slow down, it will be making the fares cheaper in the 48 cities, assuring them that not only riders will benefit from this but also themselves. On the list of cities that got lower prices, are included Atlanta, Baltimore, Dallas, Miami, Sacramento and San Diego.
By Sebastian Andro