UBER
11 months ago
 

Uber’s rollercoaster ride: fluctuating prices, physical attack in Paris, moral attack in SFO

Uber has had an eventful 2014, so far, be it the heavy price cut it announced for UberX in many cities, its competitive moves in Shanghai and Bangalore, the violent protests against it in Paris, or the case of an Uber driver killing a girl in a California accident.

When Uber raised $258 million in Series C funding last year, Uber CEO Travis Kalanick said:

“This new fund will be used to expand into new markets, accelerate customer and driver acquisition, and fight off protectionist, anti-competitive efforts.”

Since then, Uber lived up to this promise by launching its service in at least two cities every week. Now, the company operates in 26 countries worldwide, with a presence in more than 60 cities.

Staying competitive in Shanghai

In August 2013, Uber launched its service in stealth mode in Shanghai. However it had to discount its rates by 30% to drum up business before the official launch in February 2014.

The minimum fare has been slashed by 50% from $9.90 to $4.90, and the base fare from $6.6 to $3.3. Also, the charges to Shanghai Pudong Airport is slashed from $99.10 to $57.80.

Tnooz asked Uber about the reasoning behind the price cut, Sam Gellman, head of Asia expansion told us:

“Uber all over the world is about being everyone’s private driver, which means keeping prices as accessible as we can for users, while at the same time keeping prices high enough that partner car/driver companies want to use Uber’s technology to connect with customers.

“In Shanghai, as we learned more about the economics of the industry, we saw opportunity to adjust prices lower. We have made similar price moves recently in Taipei, LA, San Francisco, and many other cities around the world.”

Taxi hailing service is hot in China

This move from Uber Shanghai comes at a time when taxi-hiring services in China are attracting tens of millions in funding.

Currently, Uber operates only the luxury car hire service (BLACK) in China, and it still hasn’t rolled out the low-cost hiring service UberX.

Recently, Yongche, a Beijing-based car hiring service, secured $60 million from Ctrip and DCM.

Yongche also has a luxury car hire segment, where it charges $46 for an Audi A6 or and a BMW 5 Series vehicle to ride to Pudong Airport. However, even after the price cut, Uber rates for the airport are higher than Yongche.

But, when it comes to non-airport rides, Uber prices beat Yongche’s.

Last week, Didi Dache, China’s biggest taxi hailing company secured $100 million funding; it also integrated with Tencent’s WeChat Pay, which enables users of WeChat to access Didi Dache easily.

Other competitors include Shanghai-based Kuaidadi, which secured $100 million funding, and another Shanghai-based company eHi, which obtained $100 million funding from Ctrip and other investors.

Apart from Shanghai, Uber also launched its service in stealth mode in Shenzhen (in November 2013) and Guangzhou (in December 2013).

UberX – cut, cut, and cut

Last week, Uber CEO Travis Kalanick announced massive price cuts (15-34%) across 16 out of 24 cities in which it operates UberX, the low cost hiring service.

The company claims that, on average, across all Uber cities, UberX is 26% cheaper than a taxi.

This effort by Uber is to become the cheapest ride in city.

Uber explains how it is making this possible:

“More cars and drivers mean better coverage and lower pickup times. Lower pickup times mean better economics for drivers, and thus more drivers and cars. And we want to deliver that value to our customers.”

Different strategies – local vs global

In Bangalore, the autorickshaws were on strike on January 6, 2014. Autos are one of the most used transport modes in the city.

Looking at the past activity of Uber, one would have expected a price surge on January 6. But, Uber did the opposite, it slashed the prices by 75% on the day of strike.

When Tnooz asked Bhavik Rathod, general manager – Bangalore, about the market reaction to the massive 75% price cut, he says:

“We were thinking how we can win the trust of Bangaloreans by making them use Uber on a day when other options are very limited. We wanted to keep Bangalore moving, and make it easy.

We served a larger number of bookings on Monday than any other day. Also, we got lot of positive coverage on media.”

However, on New Year’s Eve, Uber hiked its rates to more than two times the normal fare in Bangalore, and in the case of US, the prices surged more than seven times.

When asked about the overall market response for Uber in Bangalore/India, Rathod adds:

“Uber is 20-30% higher than a regular cab service. We are a SFO-based global company, but we are very local wherever we operate. We have local people everywhere.

“We soft-launched in Bangalore on August 29, 2013, and officially launched on October 1, 2013. Response from the market is overwhelming. Now we have increased our suppliers in Bangalore.

“Three months ago, when a customer opened the Uber app, now and then we would have disappointed the user, but now users will get a ride in 15 minutes (maximum). We keep adding suppliers, because demand is always there.”

Since the demand is overwhelming in Bangalore, Rathod says that there won’t be any price cuts, and Uber wants to stick to the Uber BLACK model for now.

Uber Asia – Expanding rapidly

Uber is hiring in all 14 cities in which it has presence in Asia. A video from the Uber Asia team about how it feels to be in Uber:

Attack in Uber Paris

On January 13, the protest by French taxi drivers turned violent and resulted in attacks on private hire vehicles (including Uber) outside two main airports in Paris – Orly Airport and Charles de Gaulle Airport.

The taxi drivers were protesting against the increased competition that Uber and other chauffeur driven services pose.

A Twitter user, Kat Borlongan, tweeted about the attack in her Uber car:

Uber car attack - Paris - Tnooz

The government recently imposed a new rule that would make private hire vehicles like Uber have to wait a minimum of 15 minutes between the time a car is requested and picking up the passenger.

However, local media reports that taxi drivers are demanding a waiting time of 30 minutes be imposed, along with a minimum €60 fare and tougher license regulations. This would be a major blow to Uber as it directly hits the USP of the service of getting a car in few minutes.

San Francisco incident

On New Year’s Eve, a driver, who also worked for Uber, allegedly hit three people in San Francisco, and a six-year old girl was killed. Initially, Uber distanced itself from this incident by saying:

“We work with transportation providers across the Bay Area, but we can confirm that this tragedy did not (sic) involve a vehicle or provider doing a trip on the Uber system.”

Later, the company posted an update to its blog confirming that the driver was an Uber partner and his license had been deactivated:

“We can confirm that the driver in question was a partner of Uber and that we have deactivated his Uber account.
The driver was not providing services on the Uber system during the time of the accident. We again extend our deepest condolences to the family and victims of this tragic accident.”

This incident raised questions about the responsibility of taxi-hailing services when incidents like this happen.

 
 
Karthick Prabu

About the Writer :: Karthick Prabu

Karthick is general manager for Tnooz in Asia, based in Bangalore.

He has previously worked for Port of Singapore Authority, SITA, TravelCLICK, Rezopia, Travelocity, MindTree and Happiest Minds Technologies.

Follow him on Twitter, LinkedIn, Facebook and Google+.

 

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  1. Chris W

    There are so many questions to be asked about this service. What happened in SF could set a precedent across every industry who relies on drivers delivering their product and service. What is stopping UPS from developing the same business model as Uber’s and making their drivers “partners” so that in the event of an accident, they have the ability to claim that the driver was not on UPS time and on his way home and therefor UPS not be liable? What is stopping any company (cable, electrical, taxi, limo, trucking ect…) from requiring their drivers to purchase a personal vehicle and provide their own personal insurance in order to be employed as a driver for that company so that the company can avoid all liability in the event of an accident or lawsuit. How many insurance companies would provide insurance to drivers who are at an increased risk of an accident due longer hours on the road knowing full well that in the event of an accident only the insurance company could be named in a lawsuit and not the company the driver was “partnered” with. All of this seems like it could lead us down a path that we don’t want to be on if we don’t rein in the craziness now.

     
  2. Andrew C

    Aggressive expansion is a good way to add value for upscale well-traveled clients. One app gives you a ride in many places. Smart move.

    That poor SF driver didn’t have a passenger in his car when he killed the girl, but was he on the way to pick up a passenger, or on the way to work? It was New Years Eve and he does drive for pay. It’s possible but unlikely he was taking the night off and was on his way to a party. And what is his immigration status?

     
 
 

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