Tuesday, January 3, 2017

Questions Drivers And Riders Want Answered: "Will Uber Cut Rates In January 2017?"

This is a couple weeks old but more timely for the wait.
From The Rideshare Guy:
Uber has consistently cut rates in January for three years in a row now.  In fact, it’s actually happened on the same day the last couple years and, as you can imagine, it’s not a happy day for drivers. Nobody likes having their pay cut overnight, but Uber has this bad habit of cutting prices AND telling drivers it’s going to be good for them too! They argue that lower prices increase demand and allow drivers to increase their utilization rate, thus making more money.

Yet, after three years of these rate cuts, I have yet to find a single driver tell me they make more money after fare cuts than they did before.  Oh, and there’s the fact that rate cuts mean drivers have to drive more miles to make the same amount of money, thus increasing their expenses, which Uber never takes into account. I think rate cuts are bad enough, but Uber’s messaging around rate cuts has always caused a lot of resentment among drivers.

In the past, when Uber has cut rates, there is usually a lot of talk about driver strikes and organizing, but it typically hasn’t amounted to much.  Every single driver is directly affected by rate cuts, but since a majority of drivers are part-timers doing only 10 hours a week or less, you have a lot of people who aren’t as invested in this job as someone who depends on it for their full-time source of income. There may be a lot of justifiable anger over rate cuts, but a lot of drivers just end up quitting, or scaling back their hours, and the ones who do stay are forced to work more and make less.

Timeline of Rate Cuts
Jan. 9, 2014 – Uber cuts rates in 16 of its 24 US cities.
Jan. 8, 2015 – Uber cuts rates in 48 cities.
Jan. 8, 2016 – Uber cuts rates in more than 100 cities.
Jan. 8, 2017 – TBD

Why Does Uber Cut Prices Every Year?
According to Uber, seasonality plays a big part in demand for rides, and January to April has always been a slow time for rideshare companies.  I guess people are looking to save money after the New Year and stay indoors, so in order to drum up demand, Uber cuts rates.
From a business perspective, this makes some sense.  Remember, Uber is a private company and their priority right now is growth.  And since they’re still losing so much money every year, an IPO isn’t really on the table.  So when they go to raise their next round, investors care a lot more about an upward trending growth curve than how they got that curve.  If Uber’s growth curve tends to lag at the beginning of the year, cutting prices is a sure fire way to maintain their growth rate and look good on paper for investors.

De-bunking the Uber Myth that Lower Fares = Higher Earnings...