In January last year, Uber made similar cuts to its fare prices at a percentage between 15 and 34 in 16 cities out of the total 24 where the company was running its car sharing service "UberX." These include the cities of San Francisco and Los Angeles.
At such time that Uber offered the price cuts, its drivers' earnings were not guaranteed. The recently announced price cuts were made out of the company's overall confidence in its drivers' earnings gains. In Chicago, the price cut shows that even though Uber customers pay less than the average fare, the drivers' average hourly earnings have increased.
"We're so confident in the earnings gains drivers will see that we're making earnings guarantees in every city where we're cutting prices. We feel that it is important for drivers to have this kind of certainty and comfort going into a price cut," said Zara in Uber's official blog site.
Uber is cutting prices in 48 of its "newer" U.S. cities which have not experienced any similar price cuts from other riding services as yet. In the company's new round of price cuts, Uber is focusing on smaller cities where the company has expanded to recently. This would mean that Chicago and New York are not seeing any price cuts from the company.
Uber is using its cash reserves in order to expand its user base and keep its control of the ridesharing industry. Believing that offering service is capital intensive, Uber had successfully raised two billion dollars in its funding rounds.
Some markets deal with the rivalry by launching aggressive price cuts. Others think that offering price reduction is an effective way to increase the service's consumer appeal and awareness.
"We expect that these seasonal price cuts will help bring newer Uber markets in line with our larger ones with lower costs for riders, higher earnings for drivers, shorter wait times for both, and a better experience for all."
Uber has also turned to other angles of the business by diversifying its offerings as a way to gain new consumers and meet varying consumer demands. An example of which is when the company launched its "rent-a-van" logistics service in Hong Kong.
