Who Wins The Uber Versus Taxi Price War?

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Uber-CEO-Founder
Uber- CEO-Founder – Travis Kalanick

Uber, the hugely popular ridesharing service currently valued at around $15b, has a lot going for it. Despite being banned in Germany, protested against in France, England and elsewhere, the company manages to grow at rates that seem exponential. What’s of particular interest is that they are providing cheaper services despite providing, allegedly, a higher reward to the drivers.

In a recent blog post, Uber reported that their ridesharing services in NYC have become much cheaper during the last few years. “Our fares this year are lower than ever, making Uber both the highest-quality and most affordable ride on the road” are their exact words. Notwithstanding the fact that “highest-quality” doesn’t necessarily follow from “our fares are lower than ever”, NYC is actually reported to be the only city in the US where taxis are cheaper than Uber rides. So who is telling the truth?

(Image Sources: Debby WongLuciano Mortula)

As concerns driver rewards, due to the growing demand and increasing availability of drivers, the service has become cheaper without compromising their compensation. This was achieved by the increased efficiency the sheer amount of new drivers created, meaning there’s less idle time and pickups are faster. All this, coupled with ‘surge time’ price peaks, could make their assertions more tangible than a mere claim. However, Uber’s activities in other cities don’t paint such a rosy picture.

How well-off are the drivers?

Upon entering new locations, or when having territorial clashes with Lyft, Uber generously subsidizes riders and drivers alike. For example, even though San Francisco Uber users were offered 15 per cent off during the summer, the drivers didn’t experience any wage cuts because the company paid them more than they earned.

However, the honeymoon seems to be over. Drivers have recently seen their hourly rates cut for about 25%, and commissions for new drivers are at an unprecedented 25 per cent in San Francisco. The company’s ads confirm it: whereas previously they advertised that drivers can earn up to $35 an hour, now that figure has shrunk to $18. Incidentally, that’s a hefty $6 below the median US hourly wage.

Don’t misunderstand, Uber is definitely valuable. The company offers a competitive service that people appreciate, like and use. Plus, it seems that it’s merely a matter of time before the legal issues are solved, because the service is too, well, popular for it to be banned entirely.

It’s just that, as there’s a lot of money involved, things are bound to get ugly as everyone fights for their cut. So far, we can see that Uber isn’t afraid to antagonize their second most valuable resource, the drivers. But that’s their own problem, as long as there still are people who want the job, right?

By Lauris Veips

Lauris Veips

Lauris Veips is a freelance writer, hailing from cold and distant Latvia. A cloud enthusiast and supporter of anything innovative.

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