Uber recently announced it would be raising rates on passengers in certain markets, which made us curious: would drivers see a corresponding increase? Senior RSG contributor Christian Perea breaks the latest news and what it means for drivers.
Last Friday, Uber informed drivers in Louisiana and Florida that they were going to be raising prices for passengers – but rates for drivers would remain the same.
Fortunately, UberMan was around for the Friday bad-news-dump and got this excellent video out for drivers.
It turns out that most drivers saw a very teeny-tiny, slight increase in their pay. Usually of about a penny per mile or minute!
Meanwhile, Uber saw a pay increase of anywhere between 10 cents to 23 cents per mile!
Uber Just Increased Their “Spread” Significantly
Here’s a statement from Uber on the (self) pay increase:
What we collect from this small increase in rates will help us continue to improve the app, provide support, and develop features that help drivers make the most of their time on the road.”
Small increase in rates?
I sloughed through a bunch of Facebook groups, forums, emails and other sources to compare the old rates with new rates for passengers and drivers. The big takeaway from all of this was that Uber just gave themselves a LARGE pay raise in Florida and Louisiana!
Related: Why would Uber do this? Maybe they need money…
Just How Much of a Raise is Uber Getting?
Let’s go through some quick examples:
Rates increased for passengers in Tampa from $0.86/mile to $0.96/mile, an effective increase of 11.62% on the per mile rate of the fare. Pretty solid raise for Uber, right? In our 2018 survey, drivers told us that they want to be making 30% more – it would be nice if we could arbitrarily increase our rates like Uber did.
Unfortunately, this means that drivers who previously paid a 25% commission to Uber (earning $0.645/mile) are now paying around 32% commission to Uber on their per-mile earnings!
Related: And don’t forget upfront pricing!
Rates in Baton Rouge increased for passengers from $0.90 per mile to $1.13 per mile. A whopping $0.23 cent price hike!
Again, driver pay in Baton Rouge essentially stayed the same. So those who previously paid a 25% commission to Uber now effectively pay a 40.27% commission to Uber on the per mileage portion of each fare.
Miami drivers were also hit pretty hard. Passengers now pay $1.05 per mile and $0.16/minute instead of the previous $0.91 per mile and $0.13 per minute. Drivers saw a minor increase for per minute fares from $0.0975 to $0.104 and an increase in base fare from $0.71 to $0.72.
Right now, Uber quotes me $13.23 for a ride from downtown MiamI to Miami International Airport. There is no surge.
Google Maps gives me an estimate of 13 minutes, and 7.8 miles. As a driver, my fare would come out to:
Passenger Pays:
$1.10 Base + $0.16/minute (13 minutes) + $1.05/mile (7.8 miles) + $2.20 Booking Fee= $13.57
Driver Receives:
$0.72 Base + $0.104/minute (13 minutes) + $0.6825/mile (7.8 miles) = $7.40
Uber Gets: $6.17 Driver Gets: $7.40
Effective Uber Commission: 45.35%
As a passenger, Uber actually originally quoted me $23.24 and assumed in its “route” that I was going to THE BACK of the airport. Luckily I saw this and corrected it. I suspect a lot of passengers pay the extra $10 without checking though.
Note: A small portion of drivers are on an older, grandfathered-in, schedule of 20% so their numbers are a little different. The overall theme is the same though: they also now pay more to Uber.
Related article: Essential gear every rideshare driver should have
The Next Step To Becoming Profitable and IPO
Making more money is important to Uber because last year, they lost around $4.5 billion dollars!
Uber wants to IPO in 2019. In order to do that they have to show somewhat sound and relatively attractive financial statements. One important statement is their cash flow statement, which shows that around 80% of that juicy $40 billion in gross bookings goes to drivers.
A big challenge for the last few years has been figuring out how to capture a larger portion of the fare from drivers. Internally referred to as their “take rate”, in Q2 of 2017 it was 19% and in Q3 of 2017 it was up to 21%. Uber claims they want to get to between 22% and 26% on their take rate. Such a change will go a long way in meeting that mission, which will allow their their cash flow statement to look better.
Upfront Pricing
All of this presently leaves out Upfront Pricing which has been known to go a little rogue when it comes to charging passengers, usually with the upside in Uber’s favor. We’ll have to see what sort of “Upfront” pricing numbers come out of Florida and Louisiana in the next few months.
We’re Next!
Uber (and Lyft) like to run experiments on unlucky cities (like Charlotte’s alternative surge pricing) before rolling out big changes to the rest of the US market. This is a pretty important move in their strategy to avoid meltdown.
So expect this to come to your city soon as a sort of secret price cut.
What this means is that when they run a “bad” experiment, it’s even more important to be EXTRA loud in expressing your displeasure. 😀
How Can You FIGHT This?
A lot of drivers I saw on different forums have asked what they can do to fight this. I’ve put together some quick suggestions:
Drive for Lyft: They pay the same, but rates are now lower for passengers. This means it should be busier and possibly have more PrimeTime. This might, however, be a short-term solution as Lyft may decide to follow in Ubers footsteps.
Stage A Protest: Legally, we can’t “strike” as independent contractors but as it turns out, Uber is like a super-flexible gig so if you can manage to convince a large (preferably loud and rowdy) group of fellow drivers to take a break at the same time and at the same place (ahem Greenlight Hubs) with some signs and shouting…
Related: How to Organize a Group of Uber Drivers
You can organize in Facebook groups, set up a blog, and collect email addresses to coordinate with like-minded individuals in order to strike err….I mean…take a break at the same time.
List of Uber Greenlight Hubs: Here
You don’t have to believe in unionizing to stand up for yourself and other drivers. Let’s all just agree that the people who do all of this work need a voice 🙂
Quit Driving/Make An Escape Plan: Not all of us have this option right now but many of us do. Furthermore, we can all start planning the next part of their lives beyond driving.
Related: How to Create Plan B as a Rideshare Driver
Has this sort of price change happened in your city yet? Any FL or LA drivers experience this price change and want to share screenshots?
-Christian @ RSG
