After announcing uberPool in India and a price war with Ola, Uber has decided to tweak its fares for extended trips in Delhi-NCR. The company lost $1.3 billion in the first half of 2016 and this leakage of capital is what worries Uber.
In a mailer sent to all Uber users, the company has decided to increase the fares by almost 100% on commutes longer than 20 kms. The fares have been increased from Rs 6 per km to Rs 12 per km for the cheaper UberGo and from Rs 9 to Rs 13 for the more expensive UberX. The new rates will apply only after 20 km of a trip is over.
Thankfully, uberPool isn’t affected by this price change, and the rates will be lesser by up to 50% for all pool rides.
The email read, “To ensure a reliable ride when you are travelling long distances within Delhi NCR, we’re introducing a revised fare structure. The change aims at ensuring you get a ride when you need one by providing fair earnings for our driver-partners. After the first 20km, you will be charged Rs 12/km on UberGo and Rs 13/km on UberX.”
Most of the people travelling from North and West Delhi to Gurgaon/Noida will have to pay higher fares now. Uber goes on to defend this by saying that radio cabs and other competitors have similar pricing and they are just aligning with them.
Is it the Funding or Just a Realization?
Uber has been getting funding from a lot of companies including Morgan Stanley, Menlo Ventures, Tata Capital and Goldman Sachs and is one of the top most valued companies in the world. Uber took the world by storm because of it’s revolutionary yet simplistic cab-aggregation idea.
After losing over a billion in the first 6 months of 2016, the company’s key geographies like India and Southeast Asia had to be streamlined to generate higher profits. More than funding, this actions seems to be the reaction to increasing operating losses and low margins.
Now with higher prices for longer journeys, the company will be charging close to what Meru and Easycabs charge, and even then consumers will prefer Uber because it has made a name in India for being efficient and reliable.
I think Indians will not mind this price increase and would still prefer Uber over its competitors. At the max, some smart people will try making two trips instead of one long trip to reduce their expenditure, but such cases would be very less. After all, once you’ve started the journey, the destination is all you care about.