Why Uber rides are getting cheaper

Uber often comes under fire for its surge pricing at busy times, but a demand-based business model can work both ways for customers. 

Jeff Chiu/AP/File
An Uber sign is displayed on a driver's car parked near the San Francisco International Airport parking area in San Francisco.

Heading out to a movie or a restaurant is about to become a lot cheaper: starting on Saturday, Uber, the popular global ride-hailing service, began dropping fare prices in more than 100 cities across the US and Canada.

The reason? A seasonal slump, according to a statement on the company’s website.

“[S]easonality affects every business, and Uber is no exception because when people hunker down at home, demand for rides drops,” the company said.

The company has dropped fares by as much as 20 percent or more in some cities, with an emphasis on reducing the fares for UberX, its lowest-cost ride option. In Orange County, for example, fares for an UberX will fall by as much as 30 percent from where they were previously.

For some cities, this is the third year in a row that Uber has cut its prices in anticipation of a winter slump. This year, Uber also says that it will guarantee minimum earnings for its drivers to protect them from any potential earning losses. According to Uber, most drivers actually earn more during periods when the company reduces its prices. This is because as prices begin to drop, demand for rides slowly goes back up.    

While Uber says that it is interested in reducing prices so that more people will be able to “head out of the house, ditch their keys, and avoid parking,” the price cut is also an opportunity for Uber to undercut the competition.

In 2013, when Uber first reduced prices for UberX in San Francisco, the company deliberately lowered the cost of its UberX service so that rides would be cheaper than hailing a taxi.

When Lyft, the second most popular ride-hailing service and Uber's chief competitor, was asked by TechCrunch about Uber’s most recent move to reduce prices, John Zimmer, Lyft’s co-founder and president, said that “Uber prices will still be higher. What does a price decrease mean when there is 8-10x surge pricing [hiking prices at times of high demand]? It’s classic bait and switch and consumers see through that.”

Uber has shifted its pricing back to a higher premium when earnings have fallen lower than the company expected. In Charlotte, for example, a 40 percent price cut at the beginning of 2015 was pulled back to 29 percent, according to the company.

There is also a limit to the number of rides per hour drivers can reasonably make, which caps their earning potential somewhat. As a result, some drivers in San Francisco are returning to cab driving, seeking job security and more stable earnings.   

But perhaps Uber shouldn’t be worried. This month, Yellow Cab, San Francisco’s largest taxi company, announced that it is moving towards filing for bankruptcy, making plans to financially restructure the company amid competition from Uber and Lyft.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Why Uber rides are getting cheaper
Read this article in
QR Code to Subscription page
Start your subscription today