Uber has slashed prices for its UberX service by 10% in Sydney, Brisbane and the Gold Coast in a bid to grow its user base prior to drivers having to pay the GST.
The 10% fare reduction comes into effect today and will remain in place until August 2, a day after the deadline for which Uber drivers have to register for the goods and services tax.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
In May the Australian Tax Office announced Uber drivers were subject to the GST regardless of how much money they make.
Uber lashed out at the decision, describing it as a “flawed” ruling and vowing to challenge the determination.
The announcement of new “seasonal” affairs for Sydney, Brisbane and the Gold Coast follows the multi-billion dollar company deciding to cut prices in Melbourne last month.
“These prices not only make UberX more affordable than ever,” Uber said in a blog post.
“They also mean increased earnings for driver partners. As we see in cities all over the world (including New York and Perth), lower prices increase demand, keeping drivers busier, and earning more for every hour on the road.”
Lower pricing is obviously good news for consumers, but means Uber drivers will now have to work harder by completing more rides per hour to ensure they are earning the same amount.
To allay these concerns, Uber has published a graph showing how the average number of trips per hour increased by 54% for drivers following a 20% price cut in Perth.
However, the company has not yet revealed how the Melbourne price cut has affected drivers in Victoria, though it is early days.
Whether or not drivers’ pay packets in NSW and Queensland are better off will depend on how much demand increases by over the next two months.
The Melbourne UberX drivers contacted by StartupSmart this morning reported that the recent price cut had not negatively affected their income because of an increase in demand, with one driver saying he didn’t mind having to do more trips per hour.
“I do think it has been more consistent, not as much downtime has been my feeling,” he says.
“It hasn’t impacted on my income at all and I think I’ve certainly noticed there has been more first-time users. A lot of people are saying it’s my first Uber experience, so I think their strategy has worked.”
The driver said he thought the company was choosing to drop its prices now in order to entice more users onto the platform prior to drivers having to pay the GST.
“I think their thinking is capture more of the market now and it will have to go up 10% in August because of the way the taxation laws are designed,” he says.
“I think Uber is trying to fight that but I don’t like their chances.”