Cheap fares fueled the rise of ride-hailing. But will rides stay cheap forever?

By Tracey Lien : latimes – excerpt

In the fight for more customers, drivers, and market share, ride-hailing companies have in recent years embraced a simple but powerful strategy: cheap rides.

Uber, Lyft and other firms have used their ample venture capital backing to subsidize drivers and lower fares, igniting a price war that has benefited passengers at a great cost to the companies themselves.

It’s a policy so common that customers have come to see heavy ride discounts as the norm, but it’s also now facing new questions after Uber opted this week to cede the Chinese ride-hailing market to fierce competitor Didi Chuxing…

The race to the bottom is costly, Skilton said, and Uber’s battle in China shows that sometimes it’s simply not worth paying. Ultimately, he said, it makes more sense for ride-hailing services to try to win market share not by seeing how low they can go but how valuable they can be to the customer.

But it was perhaps Uber itself that put it best. Its head of operations in Asia, Allen Penn, told the Financial Times in June: “You can go out, spend a bunch of money in a city and gain some market share, but that’s not real,” he said. “You’re just kind of buying all of it — [though] you’re really more renting than buying.”…(more)


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