After announcing its new price cuts, Uber is now actually losing money from its UberX service, according to some calculations by Forbes.
UberX is the cheaper tier of Uber cars. UberX drivers usually have basic sedans like a Toyota Camry or Honda Accord, not the fancy black cars regular Uber drivers have.
UberX recently cut its rates by 25%, meaning that a rider will now pay $11.25 for a ride that had been $US15. But Uber spokeswoman Eva Behrend told Forbes that drivers will still pocket 80% of the original $US15 fare, which means that Uber winds up paying the driver $US0.75 to make up the $US12 salary for the driver.
Uber now finds itself in a bit of an odd situation. Granted the price cuts are meant to be temporary, just for the summer, but running UberX at a loss is an interesting decision.
The choice probably comes as a response to complaints from drivers after past price cuts. Not surprisingly, drivers aren’t too happy when they’re the ones that suffer for low costs.
Another interesting thing about this price cut is that it suggests a possible shift in Uber’s business model. They seem to be veering away from their original approach of raising prices as demand rises.
In theory, demand would be pretty high in the summer, but Uber is still cutting prices. And they’re keeping both riders and drivers happy at the same time. Let’s see if this model is sustainable.