From today, South African Uber users can expect to pay up to 20% less for an Uber X trip in Johannesburg and Pretoria, and up to 13% less in Cape Town and Durban. According to Alon Lits, GM for Uber in sub-Saharan Africa, the move is expected to get more people using the service more often while also ensuring Uber drivers spend more time actually ferrying passengers about and, thus, making more money.
Lits also says the company is considering bringing its Uber Pool car-sharing-type service to South Africa to help reduce the number of cars on the road and increase the amount of time Uber drivers actually spend carrying passengers, which is the only time they actually make money.
Jamba Palaniappan, who looks after Uber’s market strategy and operations in the MEA, says the Uber platform is based on one basic idea: “improving efficiency”.
“One of the core objectives is to ensure drivers are busy. Drivers can be doing one of three things — waiting, dispatched or driving a customer,” Palaniappan says. “They’re only earning on the third. The primary goal behind reducing prices is to reduce the time drivers spend waiting and increase the time they spend driving with a client.”
Of course, Uber has mountains of data at its disposal and it’s using this data to support its bullishness about the price cuts. Lits says when the company reduced fares in Lagos, Warsaw, Istanbul and Perth it did see demand increase and drivers making more money.
Moreover, Lits says Uber expects to see at least a 20% increase in demand to offset the price cut, and the company is even offering minimum payment guarantees to drivers to ensure they don’t make less money now than they did before the price revisions.
He also expects to see more cars on the road as demand increases. “We do believe with lower prices we’ll see a huge spike in demand,” Lits says. “And, on the back of that, we may increase drivers on the road. We’re measuring those metrics constantly to maintain a healthy balance between supply and demand.”
With newcomers like Taxify eager to get a slice of Uber’s pie, is the move perhaps intended to keep competition at bay? “Our biggest competition is actually from car ownership,” Palaniappan says. It stands to reason that lower prices could see more South African’s ditching their cars completely.
“Every single person driving their car to work could be in an Uber instead,” says Lits. “We’re barely scratching the surface when it comes to growth potential when you consider private car ownership as our main competitor.”
Lits also points to UberPool, a product the company offers in other markets, that lets people heading the same way share rides and, consequently, reduce the fare between them, and hints that it might consider rolling out the same service in South Africa in due course.
“An estimated 1.8 million cars head into Johannesburg each day, imagine if we could reduce that by 800,000,” Lits says. Lits won’t be drawn on when the company is likely to roll out UberPool in South Africa, though. Given the state of South African traffic, we’re hoping it’s sooner rather than later.
