UPDATED: uberX Price Cut and Its Impact On Drivers
UPDATE [5:54pm]: There are even more cars on the road than last week at this time and service levels remain high. ps. GO SOX!
UPDATE [4:19pm]: We have not seen any impact to availability or service levels thus far. We’ll continue to keep a close eye on this will keep you posted on any changes.
At Uber, we do everything we can to pack as much value into every price point. It’s how we have built loyalty among our users and become a mainstay for getting around the Greater Boston Area. What what we don’t always do a great job of communicating, is that there are two parts to the equation. It’s not just about the riders, it’s also about the drivers. If the price is too high, riders go away. If the price is too low, our partners and transportation providers cannot make a living. There is a natural tension there that we always have to balance, and honestly, it can be quite tricky at times, especially when the economic outcomes can be non-intuitive. For example, Uber started a bold initiative several months ago to lower prices on the uberX product across the country with the premise that lower prices would actually generate disproportionately more fares for drivers due to huge demand at lower prices.
Our hypothesis played out and we have seen increased net income for our partners after huge price reductions in Los Angeles, San Diego, San Francisco, Seattle, Chicago, DC and many other cities.
Last Tuesday, we announced lower prices on Boston’s uberX. The win for riders is obvious: lower fares make Uber more accessible to more people more often. But as we’ve seen in other cities, lower fares have resulted in greater gross income for the transportation providers we partner with. In fact, Boston’s uberX drivers are earning 22% more per hour since Boston’s uberX fares dropped a week ago. This additional income has also resulted in a 5% increase in the amount of time that drivers are spending on the system, resulting in 30% more income per week for drivers since our price cut last week.
It almost seems too good to be true, but what we’ve seen in cities across the country is that with lower costs, Uber becomes more accessible to more people, increasing demand for rides, especially during previously slow times. For Boston, this is particularly important in an area with over 200,000 college students, where the cost of living is already high, and where safe, reliable, affordable transportation can be hard to come by. In fact, since the fare reduction, we’ve seen a 40% increase in uberX usage in Boston.
We have developed a new pilot program – Xchange Leasing – which is a leasing option administered by an Uber subsidiary and designed to fit with the flexibility that drivers value most. The Xchange lease is one of a kind, and offers value that traditional auto leases do not provide. Unlike most multi-year leases that have high fees for early termination, drivers who participate in Xchange for at least 30 days will be able to return the car with only two weeks notice, and limited additional costs. The program allows for unlimited mileage and the option to lease a used car, with routine maintenance also included.
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New technologies are creating opportunities no one could have imagined. To understand Uber’s place in that trend, we commissioned a survey of our driver-partners and put together a comprehensive analysis.