Uber slashed the price of its UberX transportation tier in New York City by 20 percent on Monday, making rides booked via the car-hailing smartphone app cheaper than a traditional yellow cab for the first time.
Rides from Williamsburg on the edge of north Brooklyn to the East Village in Manhattan will now cost, on average, $15. That's down from $19 at the old fare, and it's a dollar cheaper than a taxi. From Grand Central Station to the Financial District, UberX will now cost $22 instead of $28, making it $2 cheaper than a cab. The price cut is only in effect for a limited time as Uber determines whether it makes smart business sense -- or, more importantly, if it helps better grind away at the traditional taxi industry, which Uber is bitterly battling against in cities around the globe.
UberX is the tier of drivers who either rent or use their own civilian vehicles -- typically Honda sedans and Toyota Priuses -- and work on their own time, deciding when and for how long they will ferry passengers around. Instead of being employed directly by Uber at specified rates like regular taxi, private, and limousine services -- as the company does for its more expensive tiers -- UberX drivers take an 80 percent cut of the fares.
Working longer means more pay, and Uber claims UberX drivers can make as much as $90,766 a year. That figure has been heavily scrutinized for its accuracy and found to be embellished at the expense of accounting for actual hours worked per week, car maintenance and gas costs, self-employment tax, and other factors that bring down an UberX driver's net income.
With the 20 percent decrease in prices in New York City, these drivers will now make 20 percent less per ride, Uber's New York general manager Josh Mehrer told New York Magazine. So a fare that used to cost $19 and net a driver $15.20 will now cost $15 and net the driver only $12. This is in contrast to recent UberX price cuts in San Francisco. The company lowered prices there by 25 percent recently, but kept driver rates at the higher old fares, essentially taking a loss on each ride and handing drivers the 5 percent bonus.
Uber says this will benefit New York City drivers, which see higher demand. "What we've seen in cities across the country is that lower fares mean greater demand, lower pickup times and more trips per hour -- increasing earning potential and creating better economics for drivers. What does what mean in the long run? They'll be making more than ever!" the company wrote in a blog post.