Uber has found itself in a pickle over a move it made last week to stay competitive against a backdrop of increasing competition from locally spawn taxi-hailing services. Particularly with the entry of LittleCabs bankrolled by one of the most profitable companies in sub-Saharan Africa, Safaricom.
Being a locally spawn product and bankrolled by a powerful local company, LittleCabs entrance into the market was anticipated to disrupt the taxi-hailing service business. In reaction to the growing local competition, Uber counter response was to wage a price war, by cutting down its fair prices by up to 35%. The fare dropped from Ksh.60 to Ksh.35 per kilometer.
Though, the company denies cutting down prices to create a barrier of entry into the market for the startup companies venturing into that market. The price cuts intended to maintain and attract more customers to Uber services, while at the same time make it extra difficult for startup companies entering the market. Also meant that taxi drivers signed up under Uber taxi services, were taking less money back home at the end of the days.
Thus, Uber taxi drivers staged a demo on Tuesday, August 2nd to protest against this fare cuts. The drivers are even threatening to jump ship and signing up with rival companies such as LittleCabs.
“We want them to bring back the original fares we used to have. If they don’t do this, we have other alternatives,” said Simon Mutembei, one of the taxi drivers operating under Uber. “We have so many other platforms where we can go. Because I need to eat. I need to feed my family.”
On its part, Uber says the price cuts is intended to give drivers more work; by lowering the fare, more commuters will find the service affordable thus increased the number of Uber rides. The overall effect will be more money being made by the drivers. As opposed to higher fare prices that make more customers shy away from using the service.
The Secretary General of the Kenyan Taxi Digital Association, Simon Mbogo said all Uber drivers will decamp and sign up with LittleCabs if their grievances are not addressed in the shortest time possible. Mbogo also went further to demand that Uber’s deduction from the drivers pay fall to 15% from the current 25%.
Commuters, who were initially thought to be the immediate benefactors of the Uber fare cut, are now hit from both sides. With Uber drivers on strike, meaning they cannot rely on that service, as usual, they are forced to turn to the regular taxi drivers.
Reports emerging indicate that the regular taxi drivers have now increased the fare they charge. It is a simple law of demand and supply. The regular taxi drivers now have more demand, while the supply of taxi services is lower than usual. Giving room for the taxi drivers to exploit the situation and raise their prices.
Mitraj Singh Lochab, a commuter in Nairobi told Reuters, “I tried to get an Uber today and was not able to. It seems like the other regular drivers are also taking advantage of the strike and have doubled their prices as well today.”
Although there are at least four taxi-haling online services in Kenya; Uber, Maramoja, Mondo Ride, Pewin Cabs, and LittleCabs, they are mainly operating in the capital Nairobi. They have little to no footprints in other cities and towns outside the capital.