Uber To Drop Prices in 80 Cities

The Uber strategy has always been about using its financial muscle to attain dominance in key markets, even if that means sustaining losses worldwide of as much as $300 million annually.

The latest move is intended to make competitors suffer, driving them out of business.where possible or forcing them to reconsider alliances targeted at Uber, clearing the way for price rises later.

The move raises anti-trust and legal questions - and may also signal that Uber is feeling the competitive threat as its investors begin to question when they will realize the outsize returns on which they are banking. JL

Eric Newcomer reports in Bloomberg:

In January 2015, Uber dropped Seattle prices, but the demand didn’t increase enough to make up for the price cut. So Uber restored prices.
Uber Technologies will drop prices in 80 North American cities starting on Saturday. The ride-hailing company hopes the move will increase demand in a seasonally slow month.
Uber said it will cut prices in Los Angeles and San Francisco by 10 percent, Houston by 20 percent, and Richmond, Virginia, by 15 percent. Prices in some cities, including New York and Chicago, will remain unchanged for now. Fare reductions will eventually be extended to 100 cities, the company said. "We believe in price cuts when demand slows down," said Andrew Macdonald, a regional general manager for Uber.
Lower fares mean that drivers make less per ride. Uber said lower fares will attract more riders, which should increase the number of trips per hour. "We care deeply about driver earnings," Macdonald said. "We actually find that a lot of drivers understand why we do this. They’ve been through price cuts before."

Harry Campbell, who runs a popular ride-sharing blog, said the change will probably upset a lot of drivers. “I don't think there's a single driver that's been around for any amount of time that thinks lower fares means that they're going to make more. I don't buy that for one second,” he said. Seth Miller, an Uber driver in Florida, said the fare reductions will prompt him to spend more time driving for Lyft, Uber's main competitor in the U.S. "I knew this was never a full-time gig but hoped it would have lasted longer," Miller wrote in a Facebook message.
Uber said the new fare prices will be in effect indefinitely. However, the company said it will guarantee that drivers receive a certain amount of money per hour in most of the cities where prices will be lowered. To qualify, drivers must have been active on the system before Jan. 8 and accept 90 percent of ride requests. The amount guaranteed varies by city and depends on the time of day.
For example, if total fares per hour in Uber's hometown of San Francisco fall below $24 on an average day, the company will make up the difference. During peak demand, that guarantee rises to $30 an hour, Uber said. "What this does is stabilize earnings for drivers while the cuts kick in," Macdonald said.
Ryan Talley, another Uber driver, said the company's promises haven't gone far enough in the past. “The guarantees don't last; they only last for about two months,” Talley said. “All they're worried about is their own bottom line.”

In January 2015, Uber dropped Seattle prices, but the demand didn’t increase enough to make up for the price cut. So Uber restored prices. "We’re a very experimental company; we don’t always know how a market is going to react," Macdonald said. "Because of our commitment to roll back if it doesn’t work, by its nature, it’s somewhat temporary."