# Analysis of Nashville Uber Low Rates and Guarantee (math is involved)



## Oc_DriverX (Apr 29, 2014)

(yes, this is long)
Most people have heard that Uber Nashville has lowered rates to:
Base: $1.00 - Per mile: $0.73 - Per minute: $0.14

In attempt to soften the blow and keep drivers on the street Uber has instituted a $16/hour guarantee ($20/hour on Fri. and Sat. nights). To earn the guarantee you need at least one ride an hour, 50 minutes of every hour online, and a 90% acceptance rate.

So the $16/hour guarantee would give the driver $12.80/hour after a 20% fee ($12/hour if it is a 25% fee). So at first glance the guarantee netting $12.80/hour does not seem too bad. But if you dig a little deeper, you realize that the guarantee turns out to be more of a ceiling, and that you are likely to earn much less, if anything from the guarantee. 

The devil is in the details. Let's assume that you don't get a ride in an hour. Poof! The guarantee nets you nothing. Maybe you get a ping that is so far away you decide to turn it down. Poof! Once again the guarantee is gone if your % dips under 90%.

The $12.80/hour is the most you can earn and that is if by some miracle you accept a ride and that passenger is already at your location and then chooses not to go anywhere, so that you have no costs from moving your car. And then you need to somehow stay online for your 50 minutes and have no other pings. That is the best case scenario under the guarantee and I would argue impossible.

What is more likely is that your one ride will actually require your car to move. And, if your car moves, you are incurring costs. I have used the $.575/mile cost figure from the IRS (* see disclaimer below.) Some examples where the guarantee would be in force:
5 miles driven = $2.875 in costs $12.80-2.875 = $9.925 profit
10 miles driven = $5.75 in costs $12.80-5.75 = $7.05 profit
14 miles driven = $8.05 in costs $12.80-8.05 = $4.75 profit
(as you can see, the more miles driven under the guarantee the less you net.)

So, under the guarantee you are unlikely to profit over $10/hour, and you could do much worse.

Lets see what happens when your gross fares go over that $16/hour number. Assume you drive 15 miles at 30 mph with all the miles on a fare (no dead miles). That would mean 30 minutes on the clock:
15 miles * .73 = $10.95
30 min. * .14 = $4.20
Base: $1
Total Fare $16.15 (This excludes the SRF since it does not count against the guarantee.)
Driver's cut = $12.92
Driver's cost (@ $.575/mi) 15 * .575 = $8.63
Driver profit = $4.29

If you drove 7.46 dead miles to get the 16 paid miles, then your profit would end up being $0.00, nada, nothing, zilch... That would equate to >66.8% miles as paid to reach break even. That is a pretty high rate to achieve, let alone hit with any consistency.

But there are those who read the boards who feel there is too much "negativity", so here is the nirvana scenario

How about an ideal scenario of 60 miles at 60 mph for 60 minutes, all on the clock and no dead miles?
60 miles * .73 = $43.80
60 min. * .14 = $8.40
Base: $1
Total Fare $53.20 (This excludes the SRF since it does not count against the guarantee.)
Driver's cut = $42.56
Driver's cost (@ $.575/mi) 60 * .575 = $34.50
Driver profit = $8.06

If this is the best you can do without a guarantee (or surge), and in reality it is impossible to do, it is difficult to see any justification for driving for Uber with the Nashville rate structure.

--------------------------------------------
* (You may argue that the IRS figure of $.575/mile is too high. I use that figure since it is all inclusive (gas, increased maintenance, depreciation) and it seems that some readers only count gas. Feel free to use figures you feel are more accurate, but I doubt it will do too much to brighten the situation.)


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## Sydney Uber (Apr 15, 2014)

Oc_DriverX said:


> (yes, this is long)
> Most people have heard that Uber Nashville has lowered rates to:
> Base: $1.00 - Per mile: $0.73 - Per minute: $0.14
> 
> ...


Thanks for spending the time and burning brain cells on everyone's behalf OC.

Its a pretty dismal outlook on those rates.

UBER really needs to think seriously about including a hypnosis App so to subliminally convince drivers they are earning money. That or some happy drugs would be the go.

We all know that UBER uses the very best lubricant on its drivers, for the first 6 months hardly any pain at all!


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## UberHammer (Dec 5, 2014)

Uber knows the math. But Uber also knows that a lot of their drivers can't do the math. So as long as there are ignorant drivers logging on, Uber can claim it's the free market setting the price. Until government steps in to protect those being exploited, the exploitation will continue.


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## Roogy (Nov 4, 2014)

And on top of that one must take into account that uber has a spotty history of paying what it guarantees. On NYE they only paid me about 50% of what I think I was due. They got back to me today. I have to check their math.


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## Roogy (Nov 4, 2014)

Oc_DriverX said:


> (yes, this is long)
> The devil is in the details. Let's assume that you don't get a ride in an hour. Poof! The guarantee nets you nothing.


Yes and that might cause a driver to switch off the app if he feels he's not gonna get a ping. Maybe deadhead to another location and turn it back on. A waste of time and fuel for the driver. Imagine counting on the guarantee and hitting the 55 minute mark with zero pings, the pressure of realizing "if I don't get a fare in the next 5 minutes I get paid zero" ?


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## Jeeves (Apr 10, 2014)

Oc_DriverX said:


> But there are those who read the boards who feel there is too much "negativity", so here is the nirvana scenario
> 
> How about an ideal scenario of 60 miles at 60 mph for 60 minutes, all on the clock and no dead miles?
> 60 miles * .73 = $43.80
> ...


This is scary! Drivers are really going to have to think about the cheapest costing car to drive for Uber. Even then netting minimum wage is going to be difficult.


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## SCdave (Jun 27, 2014)

The only profitable scenario is if 
a) Driver's parked with engine off
b) Gets ping in same location
c) Waits 5 minutes and gets cancellation fee

Money in the bank. Other than that, yup, hard to figure out. Well, unless Uber adds a Bonus Button (that's my code word for Tip) in Nashville to test market.


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## Markbrla (Oct 16, 2014)

A lot of people are out of work and earning $4/hr with potential for more is better than zilch. So, Uber has tapped into that pool of drivers.


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## Roogy (Nov 4, 2014)

I think "Suberman" is the only driver here at uberpeople who could turn a real profit driving in nashville.


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## Just_in (Jun 29, 2014)

The 50 minute app on. 10 minutes to go to the bathroom. That sounds like the best part of the deal.


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## DjTim (Oct 18, 2014)

Thanks for doing the math above. It's a dismal outlook for any Nashville driver. Who wants to bet that 1/2 or even 3/4's of the drivers don't even know about the drop until they see their first payment from Uber?

The majority of people that post here - we are internet savvy. We do the research and figure all this stuff out. I bet a majority of drivers out there don't even know how to work their e-mail let alone stay informed about changes. That's the sad part of all of this "technological innovation". 

Really you won't see the drop off of drivers for at least 2 or 3 weeks.


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## puber (Aug 31, 2014)

When they reduced rates in LA to $1.10 I thought it was a happy hour price and most of the day I would see surges.

It wasn't the case.


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## RideshareGuru (Nov 17, 2014)

Oc_DriverX said:


> (yes, this is long)
> Most people have heard that Uber Nashville has lowered rates to:
> Base: $1.00 - Per mile: $0.73 - Per minute: $0.14
> 
> ...


I believe that the SRF is included in the guarantee as it is included in the minimum fare.


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## chi1cabby (May 28, 2014)

*Nashville Uber Drivers Say New Cuts Hurt Them, Not Company*
*http://www.jrn.com/newschannel5/new...hurt-them-not-company-287877241.html?lc=Smart*

*







*

*By Todd Walker. CREATED Jan 7, 2015
NASHVILLE, Tenn - For more than a year the ride sharing company Uber has taken the streets of Nashville by storm.

The company known for its' aggressive tactics has quickly positioned itself as a major competitor to taxis and fellow ride-share company Lyft.

Earlier this week Uber announced it's next step on their website: slashing prices once again by 25 percent.

Uber's site said the new prices make a ride from Midtown to downtown only $4 which is half the price of a taxi and three dollars less than Lyft.

"It is a part time job for me. I do it about two to three days per week," said one Uber driver who didn't want to be identified. "Usually when there's a Predators game in town or big event. I was definitely out on New Years."

He said with the new cuts, and after the temporary guaranteed money from Uber runs out, it will no longer be profitable for drivers.

"Between paying self-employment taxes, the wear and tear on my vehicle and the gas costs with the new lower rates I will not be able to continue driving when they stop guaranteeing hourly rates.

He's not alone, an online forum for Uber drivers shows several saying the price cut may be their last with several drivers threatening to quit.

Uber, in a statement to NewsChannel 5 said:

"We've done this experiment in other markets across the country and found that price cuts incentives riders to take more trips, more often, resulting in greater earnings for our partners. We're confident that this price change will ultimately increase drivers' average hourly revenue, and we'll continue to closely monitor the pricing's impact over the coming months to ensure our partners' long-term success."

Last year in Oakland and in Seattle drivers protested similar cuts and turned in their company-issued phones.

Uber, for its part, said it has hundreds of drivers on the road in Nashville at any given time and this is the slowest time of year for riders so it's trying to boost business for those drivers.

*


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## DriverJ (Sep 1, 2014)

Roogy said:


> And on top of that one must take into account that uber has a spotty history of paying what it guarantees. On NYE they only paid me about 50% of what I think I was due. They got back to me today. I have to check their math.


I knew their guarantees were anything but, when I had just started and I didn't get a guarantee because my acceptance rating was only 89%. Of course, I needed 90%. The thing is - *I ACCEPTED EVERY SINGLE REQUEST!* I'm not sure, but I do believe that's over 90%.

*UBER YOU SUCK!! *


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## grams777 (Jun 13, 2014)

chi1cabby said:


> *Nashville Uber Drivers Say New Cuts Hurt Them, Not Company*
> *http://www.jrn.com/newschannel5/new...hurt-them-not-company-287877241.html?lc=Smart*
> 
> *
> ...


Obviously deceptive. Anyone should know that gross sales mean little without a net profit. The drivers profit margin per mile has been obliterated. It doesn't matter what their fares per hour are. There is no profit left on the bottom line. The rate cut took all of what little driver profit was there before. Multiply whatever number of miles you want by zero or negative profit per mile, it will still be zero or less. Yes, the dead miles have to be included.


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## DriverJ (Sep 1, 2014)

I guess next the drivers will be getting a bottled water for driving a trip.


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## puber (Aug 31, 2014)

grams777cutterpost: 132007 said:


> Obviously deceptive. Anyone should know that gross sales mean little without a net profit. The drivers profit margin per mile has been obliterated. It doesn't matter what their fares per hour are. There is no profit left on the bottom line. The rate cut took all of what little driver profit was there before.


The same cookie cutter response I read about rate cuts in LA.
uber managed to make their PR as cheap as their rides.


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## anthony1205 (Nov 12, 2014)

chi1cabby said:


> *Nashville Uber Drivers Say New Cuts Hurt Them, Not Company*
> *http://www.jrn.com/newschannel5/new...hurt-them-not-company-287877241.html?lc=Smart*
> 
> *
> ...


The journalist has contact information on that webpage just incase anyone wants to take a moment to write in and express their concerns on a local and / or national level. Just a thought...


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## chi1cabby (May 28, 2014)

anthony1205 said:


> The journalist has contact information on that webpage just incase anyone wants to take a moment to write in and express their concerns on a local and / or national level. Just a thought...


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## just drive (Oct 29, 2014)

Drivers could help each other attain the minimum requirement to make the guaranteed rate. Like a group of drivers ping each other to get the minimum fare I guess $2.00 and pocket the guarantee.


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## dboogie2288 (Nov 19, 2014)

I saw someone pecked out a quick equation that the MTA Bus was actually MORE expensive than Uber. 

So, my question is this. Why is uber trying to go SO ****ing low?! I mean, if you save a couple of bucks over a taxi, that's a win as a passenger. Why try and make it SOOOO cheap? What's the benefit? All they are doing is just pissing off drivers. Those who actually know about uber are already customers. If you get new customers who are price shopping, and uber beats a cab at say 75% of the rate, then thats a win for everyone.... doesnt make sense why they are trying to charge SOOO much less. They are setting a precedent that they wont be able to easily move away from.


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## chi1cabby (May 28, 2014)

dboogie2288 said:


> Why is uber trying to go SO ****ing low?


Uber wants to maximise market share. It's trying to find the floor for the rates by these cuts in Nashville. In Uber's strategy, market share gain takes precedence over revenue growth. 
And UberX Drivers are basically paying for this strategy with minimum wages for their labor, and fronting Uber the capital in form of their cars that are depreciating without any monetary gain in Nashville currently.


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## Uberdawg (Oct 23, 2014)

chi1cabby said:


> Uber wants to maximise market share. It's trying to find the floor for the rates by these cuts in Nashville. In Uber's strategy, market share gain takes precedence over revenue growth.
> And UberX Drivers are basically paying for this strategy with minimum wages for their labor, and fronting Uber the capital in form of their cars that are depreciating without any monetary gain in Nashville currently.


Ubers gamble is that they will increase market share but not at the expense of revenue growth. They continue to get the same SRF and percentage fees so they will only need a slight uptick in ridership to see no net revenue loss to them. And even if they are right that drivers income will increase but that's only if you figure income the way they do. Leaving out the increased expenses that go with this increase in driver revenue actually leads to less net income. Ubermath fixes that little problem and you pretty much have to be a driver to realize it.


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## Luberon (Nov 24, 2014)

The minute uber rates fall under 1$ in my city I will hand in my deactivation request.


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## driveLA (Aug 15, 2014)

I love the false sense of excitement expressed in their announcement of lowered fares!

Yaaaa! Less money!


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## Oc_DriverX (Apr 29, 2014)

RideshareGuru said:


> I believe that the SRF is included in the guarantee as it is included in the minimum fare.


You are there so you might know better. I based my decision on the language posted from the Uber email: "Guarantees listed are gross fares per hour (total fare minus safe rides fee before Uber commission)."


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## RideshareGuru (Nov 17, 2014)

SCdave said:


> The only profitable scenario is if
> a) Driver's parked with engine off
> b) Gets ping in same location
> c) Waits 5 minutes and gets cancellation fee
> ...





Oc_DriverX said:


> You are there so you might know better. I based the decision on the language posted from the Uber email: "Guarantees listed are gross fares per hour (total fare minus safe rides fee before Uber commission)."


Exactly, "gross fares", then they take out the SRF and commission. Same as they always have.


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## Oc_DriverX (Apr 29, 2014)

RideshareGuru said:


> Exactly, "gross fares", then they take out the SRF and commission. Same as they always have.


To beat a dead horse, I read "Guarantees listed are gross fares per hour (total fare minus safe rides fee before Uber commission)" as:
Gross Fares = Total Fare - S.R.F.


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## Oc_DriverX (Apr 29, 2014)

Uberdawg said:


> Ubers gamble is that they will increase market share but not at the expense of revenue growth. They continue to get the same SRF and percentage fees so they will only need a slight uptick in ridership to see no net revenue loss to them. And even if they are right that drivers income will increase but that's only if you figure income the way they do. Leaving out the increased expenses that go with this increase in driver revenue actually leads to less net income. Ubermath fixes that little problem and you pretty much have to be a driver to realize it.


I looked at some numbers as to how much demand would have to increase to have the driver earn the same or more under the new rate structure. So here is some more napkin math. Hopefully, the Excel table will copy below and help explain it. I used a ride of 5 miles for 10 minutes as the base (30mph and no dead miles). The old fare would have been $9.45 and the new fare $7.02, which is a 25.4% decrease. Note that this translates to a *49.4% decrease* in a "partner's" profits.

I made the assumption that the 5 miles trip was the base for a driver and then looked at how much more demand was needed to offset the decrease in rates. I considered demand to be an additional ride at the same speed (30 mph) at a distance equal to the increased demand. I found that there would have to be a 96.1% increase in demand (almost double) for the driver to have the same profit. Of course the driver would have to have worked almost twice as long for the same amount of money. My guesstimate is that Uber would need a 27% increase in demand to have the same amount of profits as before. Of course at that level, the driver would still be down about 21%, and of course, would still be working longer just to get to that place. Given these numbers, I would love for Uber to explain how this fare structure would have "little to no impact on partner earnings."








Disclaimer: I know that this model is imperfect. It makes some unrealistic assumptions, such as no dead miles. It also assumes that a driver will pick up the exact amount of the total Uber increase in demand.


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## DAmadNYsportsFan (Jan 5, 2015)

I really feel bad for you guys.. They take advantage of things and it's just not fair to the drivers.. I would have quit a long time ago if I drove in a market with rates this low.. You guys should make a stand and all not drive anymore!!! Uber would budge if everyone got together but people are too scared and they prey on this!


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## yubenbeing (Dec 22, 2014)

dboogie2288 said:


> I saw someone pecked out a quick equation that the MTA Bus was actually MORE expensive than Uber.
> 
> So, my question is this. Why is uber trying to go SO ****ing low?! I mean, if you save a couple of bucks over a taxi, that's a win as a passenger. Why try and make it SOOOO cheap? What's the benefit? All they are doing is just pissing off drivers. Those who actually know about uber are already customers. If you get new customers who are price shopping, and uber beats a cab at say 75% of the rate, then thats a win for everyone.... doesnt make sense why they are trying to charge SOOO much less. They are setting a precedent that they wont be able to easily move away from.


They need growth to keep the Investor money coming in. Growth at any cost, as that is the Wall Street/Silicon Valley Mantra. Thus, these guys want Lyft dead. Take their market share and fuel the Investor engine until they IPO. Once they achieve that by pricing Lyft out of existence, they will have no competition aside from local networks that develop the tech app to become mini Ubers. The casualties will be the pioneers of the promise, current Uber and Lyft drivers. When everything is shook out, there will be a new generation of drivers, as very few from the current generation will be able to sustain the Uber mandate. My guess is that they will hire offshore by the boatload. By that time they'll have the insurance available for drivers because I believe that is the smoking gun for TNC. Uber will also diversify into providing app for any number of businesses looking to connect end users with their services. What is interesting to me is that I caught the very last bit of the original wave whereby it was possible to make some money, have some fun, and be a part of a truly disruptive technology. It is clear the new rates cannot justify my participation, so be it. I knew it was a matter of time before the string played out. Ill keep on eye on surges for a while to determine if there is a way to game that. But, realistically, the game is over.


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## Txchick (Nov 25, 2014)

anthony1205 said:


> The journalist has contact information on that webpage just incase anyone wants to take a moment to write in and express their concerns on a local and / or national level. Just a thought...


I already have emailed the writer


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## movinglotus (Nov 1, 2014)

http://chicagoinno.streetwise.co/20...gs-guarantee-uses-chicago-price-cut-as-guide/

OC Driver, you have been referenced on the interwebs lol.


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## Luberon (Nov 24, 2014)

Oc_DriverX said:


> (yes, this is long)
> Most people have heard that Uber Nashville has lowered rates to:
> Base: $1.00 -  Per mile: $0.73 - Per minute: $0.14
> 
> ...


Awesome analysis... you are surely not one of those they are looking to exploit


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## cybertec69 (Jul 23, 2014)

Luberon said:


> The minute uber rates fall under 1$ in my city I will hand in my deactivation request.


Stop it, we all know your ceiling is. 50 cents.


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## troubleinrivercity (Jul 27, 2014)

Uber can't change its name. Uber _can't change its name!_
What does this mean? It means that if they can't stop lying to the media, lying to passengers, lying to drivers; their country will ****ing shun them! Any company which cannot rebrand via name change is subject to the full force and consequences of reputation. It's true people are powerfully swayed by price advantage. But when the public acquires a bad taste in their mouths just by associating with a company, there's little a corp can do quickly if it can't change its name, as smaller airlines often do after major accidents.


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## Auto loader (Nov 19, 2014)

Roogy said:


> And on top of that one must take into account that uber has a spotty history of paying what it guarantees. On NYE they only paid me about 50% of what I think I was due. They got back to me today. I have to check their math.


The guarantees are usually worthless.


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