Yesterday, Uber drivers in New York City went on strike to protest the ridesharing company’s latest round of price cuts announced last week for Uber X and XL services, CBS reported. In January, Uber announced planned price cuts in 100 U.S. cities to stimulate demand in slower months—a move that seems to have become an annual tradition for the ridesharing company. (This is the third January in a row that Uber has made what they call “seasonal price cuts.”) In many cities, however, the cuts stick around well past the winter season. Last year, for example, Uber maintained reduced rates in one third of the affected cities, a move which angered many drivers, according to Bloomberg Business. Lyft has followed suit. What do these rideshare price cuts mean for drivers and riders?
The Reasoning Behind Uber’s Price Cuts
Uber explains the cuts are the result of simple supply and demand: in January, ride requests decrease in many cities, a result of New Year belt-tightening and wintertime hibernating (and perhaps football playoffs). Uber says they reduce prices seasonally to entice customers to use the service.
The cuts won’t be equal in every city – some markets have seen 10% price drops and others have seen cuts as high as 45%. Uber hasn’t published an official list, but The Rideshare Guy Harry Campbell, an Uber driver who maintains a successful rideshare blog and podcast, compiled a list of fare updates.
One big city so far avoiding the cuts: Boston. Uber officials say that request rates in Boston remain fairly steady throughout the year, so they don’t need to institute cuts.
Bloomberg Business says that during the decreases, Uber has “instituted temporary hourly wage guarantees to limit drivers’ earnings declines. It’s assured…outraged drivers they’ll come out ahead by making more trips an hour thanks to increased demand.” But the economic realities of the price cuts are already causing driver outrage.
Uber promised, “If drivers aren’t busier, prices will go back up again. In addition, we are guaranteeing earnings for drivers to ensure that no one is disadvantaged. That’s 24/7 incentives to put drivers at ease.” But though the price cuts only went into effect a little over two weeks ago, the backlash has already begun. The Observer reports that, despite company promises of steady—or even increased—wages resulting from the cuts, in some markets, drivers are making as little as $2.89 per hour. The dire breakdown: the Observer writes that, according to Not Cool Uber, some drivers are earning between “$2.89 and $3.22 per hour, and, after vehicle fees are taken for those who must pay Uber for their cars, $0. Additionally, it’s important to note that these earnings are drivers’ totals before spending any money on gas or maintenance.”
Many drivers are, to say the least, pissed.
An Uber Driver Give Us the Price-Cut Scoop
Quoted spoke with The Rideshare Guy Harry Campbell about how the price cuts really affect drivers, despite Uber’s public message.
“Price cuts have always hurt drivers’ bottom lines since drivers are now forced to work more to make the same amount of money while also increasing their expenses,” Campbell said. “Drivers are obviously upset with price cuts but they often don’t have a whole lot of other options. Many drivers have invested monetarily in their vehicles or just spent a year of their life driving for Uber and learning the ins and outs of being a good driver. It’s not as simple as just quitting since all of that investment would be thrown out the window.”
We asked Campbell if, in his opinion, Uber’s current price cuts would improve business (or at least keep it steady). “I think the price cuts will benefit Uber and passengers but I don’t see it being very good for drivers. More work, less income and less satisfied drivers.” So how are drivers responding? “I think some drivers have quit but a majority are still doing it, albeit somewhat unwillingly. I think eventually Uber may push rates too low, though, and that is when the quality of their product is going to suffer.”
And as for those wage guarantees? Campbell writes that they aren’t actually all they’re cracked up to be. In fact, they actually equate to an effective price ceiling, because any big fares will just be used to subsidize the guarantee for other hours.
Lyft Jumps On the Bandwagon
Six days after Uber announced their price cuts, Lyft announced they would be making their own cuts. Bloomberg Business reports that on January 15, Lyft sent an email to drivers that read, in part, “With recent price changes from the competition, we need to take action,” making it pretty evident that the move is timed to remain competitive with Uber.
Other Ways to Save: Discount Codes
Though the price cuts aren’t a boon for drivers, passengers in affected cities will certainly save money, meaning many people will be more inclined to use the services.