Ridesharing startup Uber will soon launch a premium UberX service in Melbourne following the company’s decision to slash prices by 15% in order to snuff out competition and encourage more users to jump onto the platform.
The company has told certain drivers that the new product will “provide a chance for even higher earnings” for those with the right car and quality requirements.
The announcement follows Uber’s decision to reduce how much it charges on its UberX platform, dropping the base fare from $2.50 to $2. Customers will also be charged 20 cents less per kilometre and 5 cents less per minute.
“The price change will make Uber accessible to more users, bringing more opportunities to earn and more flexibility for partners,” the company told drivers in an email.
“All over the world, pricing changes have been shown to increase partner earnings – even after including additional fuel, maintenance and other road costs. This price change has been carefully considered by the Uber team and it will help the business grow in Victoria.”
The new fares will mean UberX drivers will earn less from each trip, with several telling StartupSmart they would have to wait and see if the company’s promise of increased earnings per hour due to higher demand holds true.
One driver, who did not wished to be named, said he noticed Sunday evening “seemed to be busier” than usual following the price cut.
While the pricing changes will see drivers snap up 80% of a reduced fare per trip, Uber does pay drivers $27 an hour should they earn less than that amount. However, a minimum of one and a half trips need to be conducted for this safeguard to kick in.
This is the first time Uber has lowered its prices in Australia – a tactic that has been employed in American cities in the past after gaining traction in a local market and wanting to fend off any potential competition from services such as Lyft.
UberX has been operating for just more than a year in Melbourne, and in that time the company has conducted more than one million trips. The company has said the average UberX driver in Melbourne works 20 hours a week and earns $2500 per month.
Uber was contacted for comment but did not respond prior to publication. The company is reportedly looking to raise another $US1.5 billion in funding.