Uber has already made enemies with taxi operators in London and Paris, so picking a fight with New York’s yellow cabs is only the logical next step. The company announced today that fares for its low cost service UberX, have been cut by 20%.
“From Brooklyn to the Bronx, and everywhere in between, uberX is now the most affordable ride in the city,” says the post, with a few specific examples for NYC locals.
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Discount rates could become permanent if there’s enough interest
Uber says that the new low rates are available for a limited time, but the post implies that if there’s enough interest to justify the cut then it could be made permanent. Uber already had a lot of advantages over traditional taxies: more accountability for the drivers, no arguing over prices, and an easy booking system. People who didn’t think those perks were worth a ~20% premium are a lot more likely to give Uber a try now that they come at a ~10% discount to NYC yellow cabs.
If this campaign is successful and the rate change becomes permanent, it could serve as a template for other cities where Uber wants to expand its services at the expense of entrenched tax operators. For an industry that has been tightly regulated in most big cities, the competitive threat is clear and Uber must be expecting more pushback like it has faced in Europe.
Uber drivers have little to no control over rates
While passengers may flock to Uber’s new low rates, its drivers (not only those in New York) have just been given a quick reminder of how little protection they have in their new careers. Aside from the possibility of new regulations that bring Uber in line traditional taxi services (which are sure to spring up in at least some cities), Uber can cut their fares out from under them at any time as a promotional move.
“What we’ve seen in cities across the country is that lower fares mean greater demand, lower pickup times and more trips per hour — increasing earning potential and creating better economics for drivers,” says Uber.
Even if higher demand keeps the time commitment constant, a 20% drop in fares means that UberX drivers have to do 25% more business to break even before you consider the extra fuel and maintenance costs that go with it.