Uber has cut the prices for its ride-sharing UberX tier in Sydney by 10 per cent in a bid to get the shivering masses around for cheap, but is it a good idea?
In a blog post today, Uber Sydney said it would bring a Winter price cut to Sydney, slashing prices by 10 per cent for all rides.
Here’s what that looks like in practice:
The price cut takes effect from today, and will stay in place until 2 August as part of a seasonal adjustment. Read: it’s cold and Uber wants you to take more UberX rides around town.
It’s easy to think that the strategy of dropping prices by 10 per cent as a protest against the collection of the Australian Goods and Services Tax mandated by the Government, but it’s a bit more than that. Uber has made seasonal price adjustments in other countries around the world that don’t collect a value-added tax, meaning that this price drop is more than likely just about increasing demand to meet overwhelming supply.
The price drops are great news for consumers looking to save a buck, but it’s another story for drivers.
Uber’s rationale for lowering prices is that it encourages more people to use the service: more demand balances out the massive supply of UberX drivers in the city and drivers all make more money.
In fact, Uber says as much in its blog post on the price cuts:
Benefit to partner drivers
These prices not only make uberX more affordable than ever. They also mean increased earnings for driver partners. As we see in cities all over the world (including New York and Perth), lower prices increase demand, keeping drivers busier, and earning more for every hour on the road.
What it doesn’t say, however, is what happened to drivers in other cities around the US when a similar Winter price cut was implemented back in January.
48 states had their UberX prices cut, and it led to a surge in the amount of work drivers had to do for essentially less money.
A report from Observer showed a graph, indicating UberX drivers in these cities had their “productivity” increased by 45 per cent, but actual earnings only went up by 12 per cent.
Uber simplified the graph for its blog post, but the same result can be inferred from a trial of lower UberX fares in Perth following a drop in fares of 20 per cent:
Yes, fares per hour increased by 37 per cent, but it increases the amount of trips drivers had to take by 54 per cent to earn that much.