Uber, the transportation service provider that ignited the trend of unregulated drivers competing with cab services, will unveil a new pricing model that it claims is cheaper than taxis and aimed at stemming its growing tide of rivals.
Prices for the company's UberX service — in which noncommercial drivers pick up customers in their own cars through a smartphone application — were slashed by about 25 percent Wednesday, according to Ilya Abyzov, Uber's manager. A trip from North Beach to San Francisco International Airport now costs $50. Getting from the Financial District to AT&T Park is $8, and it costs $15 to travel between the Marina and the Mission district. Uber asserts that its new prices are now 10 percent cheaper than San Francisco taxi rates.
Abyzov said the company has embraced similarly cheap pricing structures in other cities across the country. When the California Public Utilities Commission — the state regulator — issued a ruling earlier this year allowing Uber to use noncommercial drivers, the company decided to pursue a cheaper pricing model in San Francisco. According to Abyzov, demand doubled for Uber services following the announcement Wednesday.
However, Charles Rathbone, an assistant manager at Luxor Cab, questioned Uber's claim that its new services were 10 percent cheaper than taxi rates. After all, he noted, Uber and regulated taxi companies charge $2.75 a mile and a base fare of $3.50.
Pressure from competitors such as Lyft and Sidecar — which use the same model as UberX — played a role in its decision to reduce fares, Abyzov said.
“Obviously, we have to be responsive to competition,” Abyzov said. “But we're still maintaining our high standards. A lot of those companies have drivers with a two-door 1996 Accord. That's not something we have at UberX.”
Abyzov said UberX drivers have been OK with the new pricing model, trusting that the lower prices will bring in a slew of new customers. He said UberX will likely be the future focus of the company as it transitions its limo and town car services toward a more niche market. Limo drivers partnering with Uber have had contentious relations recently with the company, claiming it pays low wages and fires people indiscriminately.
While Uber hailed its new pricing model as a boon for San Francisco, cab officials said the development will only harm customers in the end.
“This model is a race to the bottom,” said Athan Rebelos, general manager at DeSoto Cab. “Companies like Uber don't own anything, they just have an app. Some company that has even less-experienced drivers is going to come out with even lower prices, because they don't have to deal with the regulatory process. In the end, someone is going to get seriously hurt.”
Luxor's Rathbone also wondered why the San Francisco Municipal Transportation Agency — which monitors taxis in The City — hasn't done something about unregulated companies directly undercutting sanctioned services.