Surprise surprise, in the latest ongoing saga of ridesharing price wars, UberX has cut its Bay Area prices 25 percent. I guess that’s what you do to celebrate after raising a $1.2 billion venture round.
The Bay Area shouldn’t feel too special. Scrolling through the UberX blog, it’s clear the company is cutting prices left and right in many of its markets. It’s been doing so all month, and the Bay Area is one of the last markets to get the price cut.
The announcements also come with warnings, to the effect of “The temperature is high… but our prices are low!” or “Cheaper rates…just in time for summer!” or “These prices are only in effect for a limited time. The more you ride, the more likely we can keep them this low!” It seems like a haphazard, unpredictable approach, which may be exactly the point. Price cuts started in some national markets at 25 percent on June 13th, other international markets at 20 percent at the end of May. According to the UberX blog, the first American city to see the cut appears to be Indianapolis on June 12th. In other words, there’s no rhyme or reason to the madness.
Or is there? Such randomness is not a bad business plan. UberX is keeping its customers on their toes. After all, if you do temporary price cuts starting and ending at different times, then customers never really know when they’re getting it cheaper. UberX doesn’t flag rides in the app as “25 percent off,” nor do we know how they’ll announce if discounts end (an Uber spokesperson said customers would be notified if rates were going to rise, and pointed out that the most recent cuts came on top of existing discounts made back in January.)
This is in contrast to Lyft’s price war style, which was to slash all prices — up to twenty percent — in all markets at the exact same time — and then cut a further ten percent after launching in 24 new cities. But just like Uber, no word on when those “temporary” cuts are over.
In terms of city-wide expansion, at this point UberX is miles — like literally thousands of miles — ahead of Lyft, despite the fact that Lyft launched before UberX.
Just this week UberX started service in Indian markets for the first time, including Bangalore, New Delhi and Hyderabad. Local business publications are already raising concerns, like the fact that most Indian passengers prefer to pay by cash. Having been to Mumbai my concern is more how the hell UberX expects to compete on price with the damn rickshaws.
India is not alone. UberX is also in Germany, France, Australia, New Zealand, China, the UAE, Saudi Arabia, and other countries to varying degrees. That doesn’t even count Uber Black, which is in 39 countries.
Uber’s scaling has been rapid, impressive and almost terrifying. One can’t help but wonder what sort of infrastructure it has in place in each new community after such fast launches. After all, India’s insurance and background check requirements are going to be different than the United States, as are Saudi Arabia’s, China’s, India’s, and so on. If Uber struggles to nail safety in the States, what’s it going to look like in other, less developed countries?
The price wars — and international expansion — do explain its need for the reported 1.2 billion funding round. To play the game of money chicken with your competitors, you better be holding the most expensive gun.
[illustration by Brad Jonas for Pando]