# Facing a Price War, Uber Bets on Volume [Bloomberg] 1/21/16



## Michael - Cleveland (Jan 1, 2015)

*Facing a Price War, Uber Bets on Volume*
http://www.bloomberg.com/news/articles/2016-01-21/facing-a-price-war-uber-bets-on-volume
*The U.S. operation cuts fares while promising imminent profit.*
January 21, 2016 - 4:14 PM EST

It's becoming a bit of a holiday tradition for Uber: ringing in the new year by lowering fares. Amid a price war with rival Lyft, the ride-hailing leader reduced its rates by 10 percent to 45 percent in 100 cities across North America. In Detroit, Uber drivers' per-mile rate is less than it takes to cover their gas and the depreciation of their cars, according to IRS figures. "It's depressing," says Bill Scroggins, an Uber driver in Indianapolis. "I'm not even sure I want to drive anymore. It feels like I'm doing it for free."

This is the third year in a row Uber has discounted fares in January. It calls the cuts seasonal but says they could last indefinitely. *Last year rates never rose again in almost a third of cities; only in two did they return to precut prices*. Uber has instituted temporary hourly wage guarantees to limit drivers' earnings declines. It's assured Scroggins and other outraged drivers they'll come out ahead by making more trips an hour thanks to increased demand.

That may be what Uber is telling itself, too. A few months ago, Chief Executive Officer Travis Kalanick told employees that North American operations would turn a profit in the second quarter of this year. The goal sounds less realistic in light of the price cuts. "Uber has to sacrifice profits for growth," says Evan Rawley, a professor at Columbia Business School.

"We care deeply about driver earnings," says Andrew MacDonald, a regional general manager for Uber. "We believe in price cuts when demand slows."

On Jan. 15, Lyft said it would cut fares, too. "With recent price changes from the competition, we need to take action," Lyft wrote in an e-mail to drivers. The company also announced a $1 billion round of funding on Jan. 4 to help keep its pink-mustachioed cars on the road. That brought Lyft's fundraising total to about $2 billion-a ways from Uber's $10 billion, but enough to dash Kalanick's hopes of knocking Lyft out of the market.










Uber is also churning through cash a lot faster than Lyft, having said it will spend billions to push its way into China, India, and Southeast Asia. In the first quarter of 2015, Uber lost $385.1 million on $287.3 million in revenue, according to leaked figures published by the _Information_, a tech news site. And losses are growing: In the third quarter, Uber lost $697 million on $498 million in revenue, according to a person briefed on the numbers.

Over the first three quarters of 2015, Uber lost $1.7 billion on $1.2 billion in revenue. For perspective, during Amazon.com's worst-ever four quarters, in 2000, it lost $1.4 billion on $2.8 billion in revenue. CEO Jeff Bezos responded by firing more than 15 percent of his workforce.

As it tries to expand abroad, Uber is counting on North America as a moneymaker. Kalanick predicted the continent's imminent profitability last September, during a companywide gathering in Las Vegas. (Beyoncé also performed.) Globally, Uber tends to lose money per ride, but ridership is growing. Total trips increased about 40 percent from the second to the third quarter of 2015, says a person familiar with the data. On a November call with investors, acting Chief Financial Officer Gautam Gupta said the company is profitable in two of its biggest countries, though he wouldn't name them.

In North America, Uber has inched toward profit, even with lower fares, in large part by leaning harder on drivers. It takes as much as 30 percent of a driver's fares now, up from 20 percent two years ago. Since 2014 it's been charging riders an upfront Safe Rides fee, which goes directly to Uber. The fee started at $1 per ride; it's up to $2.50 in some cities. Uber has said it uses the charge to help fund things such as safety education and background checks.

If drivers win rights as employees or manage to form unions, Uber may have to change strategies. For now, a steady influx of contractors means the company can get away with added fees and rate cuts, says Simon Kwok, a Boston driver who runs a blog about Uber and Lyft. While veterans complain that rates used to be higher, he says, "the new guys just don't know."

_*The bottom line:* Uber's third year of January rate cuts is complicating its efforts to eke out a profit in North America by June._


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## grams777 (Jun 13, 2014)

...."Last year rates never rose again in almost a third of cities; only in two did they return to precut prices."


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## JimS (Aug 18, 2015)

No one in my market (with no competition) complained about the rates. A 10% reduction in rates would have been like winning the lottery to a bunch of these riders. But no. We got hit with the biggest reduction - almost 45% for UberX.

This was a decision that was made by some idiot with no connection to Savannah. It was a decision that was made without any previous-year data to compare to. It was a decision that with 40,000 college kids returning to the area that some bonehead in San Franciso is going to see the increase in ridership and say "See! It worked!"

When will Uber ever reduce SRF's "to encourage more riders"?


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## Ca$h4 (Aug 12, 2015)

_The article's last sentence:

*"The bottom line:* Uber's third year of January rate cuts is complicating its efforts to eke out a profit in North America by June."

The complication is that Uber is increasing profits by bankrupting the drivers. How long can that last?_

*



 *


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## UberBlackPr1nce (Dec 28, 2014)

Ca$h4 said:


> _The article's last sentence:
> 
> *"The bottom line:* Uber's third year of January rate cuts is complicating its efforts to eke out a profit in North America by June."
> 
> ...


I wonder how much of that safe rider fee went to paying Beyoncé to perform. ...


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## RightTurnClyde (Dec 9, 2015)

That's one of the best articles I've read concerning uber; of course Forum members already knew most of the points written about. Hopefully we will see more articles like this...


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## grams777 (Jun 13, 2014)

UberBlackPr1nce said:


> I wonder how of that safe rider fee went to paying Beyoncé to perform. ...


Pretty ironic to be discussing profitability while paying for a no doubt very expensive company junket in Vegas. What's next? Discuss weight loss programs at the ice cream shop over a banana split?

...."Kalanick predicted the continent's imminent profitability last September, during a companywide gathering in Las Vegas. (Beyoncé also performed.)"


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## MBENZ_GUY (May 13, 2015)

grams777 said:


> Pretty ironic to be discussing profitability while paying for a no doubt very exclusive company junket in Vegas. What's next? Discuss weight loss programs at the ice cream shop over a banana split?
> 
> ...."Kalanick predicted the continent's imminent profitability last September, during a companywide gathering in Las Vegas. (Beyoncé also performed.)"


Beyonce should have sung the "uh oh" song


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## MBENZ_GUY (May 13, 2015)

Ca$h4 said:


> _The article's last sentence:
> 
> *"The bottom line:* Uber's third year of January rate cuts is complicating its efforts to eke out a profit in North America by June."
> 
> ...


PRICELESS.


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## ORT (Nov 14, 2015)

Already posted.

https://uberpeople.net/threads/uber-bets-on-volume-like-i-have-been-saying-for-the-longest.56500/


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## scrurbscrud (Sep 11, 2014)

UberBlackPr1nce said:


> I wonder how of that safe rider fee went to paying Beyoncé to perform. ...


Obviously the people running Uber are financially delusional at this point when it comes to driver pay.


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## Kruhn (Sep 24, 2015)

Michael - Cleveland said:


> "We care deeply about driver earnings," says Andrew MacDonald, a regional general manager for Uber. "We believe in price cuts when demand slows."


They care so much that they slash, and slash, and slash them to make more money.


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## scrurbscrud (Sep 11, 2014)

Michael - Cleveland said:


> says Bill Scroggins, an Uber driver in Indianapolis. *"I'm not even sure I want to drive anymore. It feels like I'm doing it for free."*


Genius, Bill Scroggins.

*I'm real sure I don't want to do it anymore.*


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## ORT (Nov 14, 2015)

scrurbscrud said:


> Genius, Bill Scroggins.
> 
> *I'm real sure I don't want to do it anymore.*


But he is still driving , Uber has figured you all out, no matter how low they go, you still get in your car to go Uber.


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## scrurbscrud (Sep 11, 2014)




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## MBENZ_GUY (May 13, 2015)

ORT said:


> But he is still driving , Uber has figured you all out, no matter how low they go, you still get in your car to go Under.


They didn't have the Austin drivers figured out. They just got a pay increase. How about the California and Mass drivers?


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## Michael - Cleveland (Jan 1, 2015)

ORT said:


> Already posted.


Pinned at the top of the section:
*PLEASE READ BEFORE POSTING IN NEWS*
https://uberpeople.net/threads/read-before-posting-in-news.246/
No one knew it had already been posted becuase the earlier poster did not follow the forum rules for posting in the NEWS section. If you post properly, the forum software will alert you when attempting to post a story that has already been posted.


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## ORT (Nov 14, 2015)

Michael - Cleveland said:


> Pinned at the top of the section:
> *PLEASE READ BEFORE POSTING IN NEWS*
> https://uberpeople.net/threads/read-before-posting-in-news.246/
> No one knew it had already been posted becuase the earlier poster did not follow the forum rules for posting in the NEWS section. If you post properly, the forum software will alert you when attempting to post a story that has already been posted.


It is posted under the NEWS section.


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## Michael - Cleveland (Jan 1, 2015)

ORT said:


> It is posted under the NEWS section.


Yes... but it is not found by search because it was posted improperly. READ THE RULES for posting in NEWS.
(oh... and thanks for the link above - I would never have known it was there!)


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