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UberX now cheaper than a NYC taxi after huge price cut

The e-hailing service always seems to be slashing prices, but is that a good long term decision?

Financial trends and news by Steven Loeb
July 7, 2014 | Comments
Short URL: http://vator.tv/n/37f5

(Updated with comment from Uber)

After months and months of hearing everyone, and their mother, rave about it I finally took my first ever Uber ride last month. Now, I really have to say that I can't see myself ever taking a taxi again if I don't have to. Uber is not perfect, obviously, but its just too convenient for me to not use when I can. 

Still, Uber never seems to be content with simply giving a better experience than cab companies; it also tries to undercut them at every turn on their fares too. The company is constantly slashes prices. Justrecently it cut prices in San Francisco by 25%, and now it has done nearly the same for New York City.

An UberX ride in New York City will now be 20% cheaper than it was previously, the company announcedon Monday. That means that, for the first time, Uber is actually less expensive than a New York City taxi.

For example, going from Williamsburg to East Village costs $16 in a taxi. It used to cost $19 on Uber, a and now is $15. Going from Grand Central to the Financial District costs $24 in a taxi. Now it is $22 on Uber, down from $28. The company makes sure to note that the prices are not permanent... well, at least they aren't right now. That door is left wide open, though.

"These prices are only in effect for a limited time. The more you ride, the more likely we can keep them this low!" Uber said.

Uber loves to cut prices. Before it slashed them in San Francisco this month, it cut prices on Uber X in 16 different markets in January. In June, it cut prices by 25% in Los Angeles, making an Uber ride 40% cheaper than a cab.

Now, I know everyone likes a price cut (I know I do!) but I am going to ask an unpopular question: should Uber actually be making these cuts? Not according to a recent article from Forbes, which calculated that, after the San Fransisco price cuts, the company was actually losing money from every UberX ride.

That is because drivers have protested the fare cuts (lower fares mean less money in their pockets), so Uber has decided to still pay out the typical 80%, but on the original fare. That means that a rider is now paying $11.25 for a ride that used to cost $15, but the driver is still making $12. That is 75 cents coming out of Uber's pocket for every ride.

With numbers like that, it does not seem that Uber can realistically keep cutting prices and also keep the cuts it has already implemented. At least not if it wants to remain a viable business.

When I asked an Uber spokesperson about whether or not the company is losing money on UberX rides, they did not address the question directly, instead giving me the following statement:

"Lowering prices brings greater efficiency by generating more demand to connect riders to drivers, more trips per hour, lower pickup times and increasing earning potential for drivers."

What seems more likely is that these cuts will be temporary; they will be used to get people to try Uber and once they do, and they like it, they will come back even when the prices go back up.

(Image source: wnyc.org)


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