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New cheaper Uber service jolts drivers

BUSINESS
By Vincent Achuka | May 28th 2017
By Vincent Achuka | May 28th 2017
BUSINESS

Hail a taxi company Uber has called for talks with its drivers after a decision to introduce another variant to its services ran into headwinds even before it is launched.

The company, which has been in a yearlong price war with Safaricom-backed Little antagonised its drivers after it slashed fares by 35 per cent in June last year. Uber has sparked yet another dispute by announcing an impending launch of Uber Go, a cheaper variant to Uber X.

Uber Go, which will allow older and smaller capacity vehicles also operates in India, but its drivers in Kenya fear the company will canibalise itself by running two competing products in the same market and push them out of operation.

“The new fares will take us back to the drawing board by taking away the little that we earn so far because obviously people will go for the cheaper option,” says Digital Taxi Association of Kenya’s (DTAK) chair David Muteru.

The drivers won the first battle in the war after the Government came to their rescue in February forcing the company to adjust its fares upwards but it appears that the war is far from over. In March, Uber increased its UberX rates to Sh42 per kilometre, Sh3 per minute with a base fare and minimum fare increased to Sh300 and Sh100 respectively for Nairobi following government intervention.

While declining to fix a floor price for operators in March, the Competition Authority of Kenya (CAK) declared Sh15.16 as the minimum a taxi can charge per kilometer in order to break even. “Fixing of minimum (floor pricing) prices as requested by the petitioners will only benefit the taxi operators, extinguish efficiencies and innovation and quality to the detriment of consumers,” CAK Director-General Wang’ombe Kariuki told Parliament.

Choice is good

The Kenya Taxi Cab Association (KTCA), Little Cab and DTAK had petitioned Parliament claiming Uber’s pricing amounted to abuse of dominance. It now appears the Silicon Valley based company is yet to run out of ideas in what is shaping out to be round two of a grueling battle for the lucrative taxi market in Kenya.

Yesterday, Uber’s Kenyan spokesperson Jay Kemboi told Weekend Business that Uber Go would definitely be a cheaper option but it will give Kenyans a choice. “This is not something new,” she said. “As a company we have reached a level where we feel like we need to segment the market because riders have different needs.”

She explained, “Don’t forget we will be opening up the market to other drivers while at the same time giving ridersa choice. And remember choice is good for everyone because even then the drivers we have will still have an option of logging in to Uber Go.”

For riders, said Kemboi, the yet to be launched service will be available for short trips. “Like if you want to go to the mall or you are traveling just alone or not going to a special occasion where you want to arrive in style,” she said. Uber runs two other variants in the Kenyan market, Uber Chopper which connects riders to helicopters and Uber Corporate which companies can sign up their employees for travel for official duties.

But in other countries where the taxi industry is more developed it has four other variants; Uber Auto, Uber Black, Uber XL and Uber Select. It is also experimenting with Uber Freight which will enable its clients to get connected to cargo haulers once it is launched.

Arrive in style

Uber XL users are mostly entry-luxury cars with seats for five passengers and whose fare is higher than Uber X. Uber Black has highly luxurious cars and the latest models that have been launched on the market while Uber Select has luxury sedans like BMWs, Mercedes and Audi with leather interior.

The company says when the time is ripe it will introduce these variants to the Kenyan market. Luxury taxi services are currently only available in the five star hotel chains signaling interesting times ahead.

“Let’s say you are going to a party or an event there are some people who will want to arrive in style. Like in Dubai, Uber Chopper is very famous,” says Kemboi. But for some of their current drivers, however, the fear is that they won’t be able to payback the loans they took to buy cars in order to enlist in the service especially when Uber Go launches.

“They should have told us this from the beginning instead of forcing us to buy specific car models and brand new ones for that matter then opening up the market for everyone else,” said a driver.

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