A Status Symbol Moves Down Market: The Context for Uber’s Lower-Priced Launch
Uber this week will add lower-cost hybrid cars to its San Francisco and New York fleets through a new feature called UberX.
Because the coverage so far of UberX has been a little skimpy on the logistics, let’s lay this out. Starting Wednesday, Uber will be able to summon something like 50-100 hybrids each in San Francisco and New York (that’s compared to about 400 Uber black-car drivers in San Francisco currently).
The hybrids will be offering rides for about 35 percent less than the price of Uber’s town cars, and slightly more than existing taxis.
Initially, to balance supply and demand and keep pickup times low, Uber is making the hybrids available to only a part of its user base. Kalanick said “low thousands of users” will get access to UberX through their Uber apps on Wednesday, and they will be able to invite friends to get priority access.
When chosen users open the Uber app in San Francisco, they’ll be greeted by a new flow that allows them to choose between UberX, a black car, or a larger SUV (see screenshot above).
The lowest estimated average fare for UberX is $14, for black cars $24 and for SUVs $34.
At the moment, existing Uber drivers have agreed to buy the hybrid cars themselves. But in order to facilitate the UberX rollout, Uber is working to offer help with financing, purchasing and providing insurance for its driver partners, Kalanick said.
I asked Kalanick if most passengers won’t just opt for the cheaper ride, when given a choice.
Kalanick said he does anticipate strong demand for UberX rides, and probably a good amount of cannibalization of the black cars. But he thinks there’s still demand for the premium service.
“The best way to describe it is that the experience will be efficient, but not as elegant,” said Kalanick.
That is, the best drivers in the Uber system — with the strongest ratings and the nicest cars — can make more money from the higher-priced options, so that’s what they’ll do.
On Uber, said Kalanick, “If you get a 4.9 [out of five stars] driver, I like to say you’re getting in a car with an artist. Put it this way — you won’t see an UberX driver opening the door for you.”
Moving down market brings Uber into closer competition with existing taxi systems as well as apps like Cabulous, Taxi Magic and new ride-sharing alternatives like SideCar and Lyft. And as with all things Uber, there will probably be regulatory headaches involved.
The alternative transportation providers may have started out with their own niches, but they all seem to be converging on each other. Asked for comment on the UberX launch today, Cabulous CEO Steve Humphreys told us he thinks the Uber will have trouble going down market. “It’s not hard for a Toyota to become a Lexus, but it’s a lot harder for a Masserati to become a Hyundai,” he said.
Uber had already experimented with cheaper options in Chicago, where its apps can be used to book participating taxi cabs.
Using existing taxis made sense in Chicago because of the particulars of the market, Kalanick said: There’s a surplus of taxis and relatively cheap fares. In San Francisco and New York, that’s not the case.
“We’ve found in Chicago that a lower-cost option opens up Uber to millions more people, and that tide raises all boats, including our higher-priced options,” Kalanick said.
Kalanick described UberX and giving users car options as Uber’s first push into becoming a broader platform.
What will this platform do, exactly? Move people and stuff around, and quickly. “Uber is the cross of lifestyle and logistics,” Kalanick said.
Kalanick said previous experiments, like delivering on-demand barbeque to attendees at SXSW and mariachi bands on Cinco de Mayo, showed Uber that its delivery system could expand to other functions. “It’s just different logistics.”
And so, this week, the Uber team is hard at work cold-calling ice cream trucks across the country for a summer promotion in which users will be able to summon the delivery of a cold treat.
—Lauren Goode contributed to this report.