Uber announced today that riders will be charged a fee for times when a driver takes longer to reach them. The company said it’ll be a variable rate, depending on the market, but that, on average, the customer will be charged an extra fee if the driver takes between 8 and 11 minutes or longer to reach the pickup point. It’s part of Uber’s “180 Days of Change,” a campaign to push for higher driver-retention rates.
It’s important to remember that Uber (and all of its ride-hailing companies) are actually competing in two separate markets: people who want to get a ride, and people who want to provide it. The problem is, those markets have almost contradictory desires. Riders want the cheapest ride possible. Drivers want to earn as much money as possible.
At the Rideshare Guy, a popular blog for Uber drivers, the fee was hailed as a move in the right direction:
Accepting a request with a high ETA is always a gamble, since you never know if a passenger is going to be headed down the block for a minimum fare or to the airport for $50. And since drivers aren’t paid until they arrive and start the trip, a lot of savvy drivers know it’s usually not worth the time/money to drive 20 minutes to pick up a rider for an average fare. That may be changing though.
For Uber to become a profitable business, it has to somehow balance offering rides cheap enough that users will use Uber, while at the same time charging those riders enough that drivers find it economically feasible to drive. Right now, Uber is largely doing this by subsidizing rides — a recent investor report found that for every ride, customers only pay 41 percent of the cost of each ride, with Uber’s investors eating the remaining 59 percent. It’s an unsustainable equation in the long run — investors will eventually want a return, and Uber can only lose so many billions of dollars before money stops coming in. The only way to even it out is to slowly raise the price of rides — or tack on extra fees to passengers.
