As reported by Business Insider: Now we know why car-hailing app Uber raised a whopping $1.2 billion in funding: It's starting a price war with its rivals.
Uber announced in a blog post on Monday it would cut the prices of its UberX service in New York City by 20% — but it’s only for a limited time.
Uber announced in a blog post on Monday it would cut the prices of its UberX service in New York City by 20% — but it’s only for a limited time.
Uber says this makes it cheaper to use UberX than taking a traditional yellow taxi.
It provided a comparison chart to show how much cheaper UberX will be for drivers commuting to various parts of New York City.
UberX, Uber’s cheaper service usually hosted by regular people driving basic sedans rather than fancy black cars, also cut its rates by 25% last week in the Bay Area,
including San Francisco, San Jose, and Oakland. As a result of that
announcement, Uber said its service was effectively “45% cheaper than a
taxi.”
Consumers like Uber’s aggressive pricing strategy but
competitors — and some of its own drivers — are not as happy. Uber
drivers have complained about price cuts, arguing they actually work for
less than minimum wage (the company argues otherwise, stating drivers can be paid anywhere between $75,000 and $90,000). They’ve also said Uber’s rating system is inherently flawed and unfair,
since drivers that receive bad ratings from their passengers — with any
reason, or none at all — can get booted from the service without
warning.
There have been protests of Uber in San Francisco, London, and Milan.
Even though the price cuts are temporary, one wonders what
would happen if Uber tried price cuts again in the future since the
drivers are the ones that suffer from lower costs. It’s an interesting
model, but its sustainability remains a big question mark for the
disruptive car service.
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