Uber cut fare by 30%
Nowadays, UBER cab is among the most discussed topics around the world. Uber is highlighted in the news every second or third day, sometimes because of their driverless cars on the roads and other times when Uber drivers go crazy, like in the instance of the Michigan killing spree. For the past few months, we have also heard about many Uber drivers boycotting Uber and signing up with Uber’s competitors like Lyft in the US. Recently Uber announced a fare cut in more than 100 cities to gain some more customers in the Taxi app wars, however, this turned out to be a bad idea globally. It was reported that Uber partners in Washington D. C started making as little as $2.89 per hour after the change in fare.
A few months ago, Uber launched their services in Lahore, Pakistan and extended their services by launching in Karachi last week. Initially, when Uber was launched, the communication of the brand highlighted the fact that they were going to provide better economic opportunities in Pakistan and wanted people to signup with Uber as a secondary source of income. It was during this time when Uber boasted that their drivers can make six figures a month. However, all that seems to be hogwash a soon after launching Uber in Karachi, Uber has announced to cut down the fare price by 30% in Lahore. Following is the updated fare list of Uber Go.
- Courtsey Propakistani
Zohair Yousafi, Head of Expansion for Pakistan, explained, “We are excited about our growth in Lahore and we are committed to making Uber the most affordable and convenient option to move around. On the driver side, we are confident that increased demand will also mean higher earnings”.
“After years of experience, we have learnt that price cuts boost demand so more people are requesting more rides with Uber, meaning drivers will spend more time with riders in the backseat and less time sitting idly waiting for a request. We reduced fares in cities such as Cairo, Egypt and Lagos, Nigeria and saw that these cuts had resulted in an improvement in the volume of rides requested on the Uber platform”, said Mr. Yousafi.
So is that really the case? Let’s take a closer look
Uber’s Model: 75% of the earnings go to the partner driver and 25% goes to Uber. So if the total bill is 100, 75 goes to the driver and 25 goes to Uber.
Let’s do some basic Maths:
Before The Fare Change:
Base Fare: 100
Cancellation: 150
Minimum Fare: 150
Per KM: 13.7
Per minute: 3.7 PKR
So if you are planning to go from location A to location B with a road distance of 10 kilometers, then here’s how you will be charged:
Base Fare: Rs. 100
Per KM charge: Rs. 13.7 x 10 = Rs. 137
Per Minute Charge (supposing that ride took you 30 minutes): Rs. 3.7 x 30 = 111
Total Estimated Charge: Rs. 100 + Rs. 137 + Rs. 111 = Rs. 348
Driver’s Share: 348*75%= Rs 261
Uber’s Share: 348*25%= Rs 87
Adding Fuel/ Maintenance Cost:
Average Fuel Consumption of Honda City, Toyota Corolla: 13km per Ltr.
Fuel Price: 64.27
Fuel Cost per km: 64.27/13 = Rs 5 per km
Engine Oil EST cost per km: Rs 1
Total Expenses per 10km: (5*10)+(1*10)=60
Profit = Income – Expenses
Profit per 10km: 261-60 = Rs 201
With The Change In Fare:
Base Fare: 100
Cancellation: 150
Minimum Fare: 150
Per KM: 6.48
Per minute: 3.15 PKR
Per KM charge: Rs. 6.48 x 10 = Rs. 64
Per Minute Charge (supposing that ride took you 30 minutes): Rs. 3.15 x 30 = 94.5
Total Estimated Charge: Rs. 100 + Rs. 64 + Rs. 94.5 = Rs. 258.5
Driver’s Share: 348*75%= Rs 194
Uber’s Share: 348*25%= Rs 65
Adding Fuel/ Maintenance Cost:
Average Fuel Consumption of Honda City, Toyota Corolla: 13km per Ltr.
Fuel Price: 64.27
Fuel Cost per km: 64.27/13 = Rs 5 per km
Engine Oil EST cost per km: Rs 1
Total Expenses per 10km: (5*10)+(1*10)=60
Profit = Income – Expenses
Profit per 10km: 194-60 = Rs 134
Let us assume that if a driver drives 10 customers for 10 km every day, he would be driving 5 hours and will make (201*10) = Rs. 2,010 a day (Before the change in fare) and (with the change in fair) he will be making (134*10) = Rs. 1,340 by driving 5 hours a day. Now to make 2,010 a day, Uber partner driver have to take approx 15 trips rather than 10 and drive up to 7.5 hours instead of 5 hours. It is also important to mention that sometimes 10 km trip may take less than 30 mins which will result in an even lower revenue.
Based on general observations and experiences, currently, most of the Uber partners have stated that they are only able to get hold of 6 to 7 trips a day.
