Uber’s Price-Cut Strategy Explained

In the wake of Uber’s devastating announcement last week that they were slashing prices in 80-100 American cities, I came across an article that may explain their thinking.  Any current driver knows that even at the higher rates (which were half what they were originally), it was nearly impossible to make a go of it.  Even passengers were beginning to notice and register complaints about lower quality cars and drivers.

So when Uber announced these latest price cuts (as usual, by giving drivers just one day’s warning before they took effect), many wondered what in the world were they thinking?

How could they possibly expect its drivers to stay on board when now they would clearly be making far less than minimum wage.  And making less than minimum wage while being required to bring a $15,000 – $30,000 piece of equipment to the job.

A piece of a equipment that has endless ongoing costs associated with it.  (Now Uber won’t be able to require any kind of car that’s worth more than about $5,000).

Uber and the NAACP start partnership to recruit 3,000 new drivers from low income communities

News outlets in New Jersey are reporting that Uber is partnering with the NAACP to recruit thousands of new drivers from the poorest areas of the state.

Ah!  That’s it!  It all makes sense now.  Get your rates so low that no sane person would ever think of driving for you, then go recruit the poorest of the poor – who apparently won’t mind making $5.53 per hour in their sporty new $6,000, 2007 Sonata (with 100,000 miles)!
Monkey Holding DollarThe reason I call this “exploitation”, where I’m sure Uber would call it “opportunity” is because these new drivers are simply not going to make any money.  Yet Uber apparently believes they’re so desperate they’ll try anything.

Uber probably believes that to the poorest of the poor this will seem like a Get-Rich-Quick scheme that will have people banging their doors down for the opportunity to lose money with Uber.

Uber has literally reached the bottom of the barrel with these rate cuts.  And it won’t be long before Uber’s service becomes worse than taxis.  Taxis are going to seem like a luxury that people in earlier times used to enjoy!

But this of course will give a great advantage to its competitors.  A smart competitor would keep its rates relatively high, pay its drivers well and require that they have nicer and newer cars.

Because at these rock bottom rates, Uber will no longer be in the position to require its drivers to have a decent car.

If you have any questions, you can contact Uber to get more clarification on rates and fees.