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Uber wages Price War in Kenya: 35% Off your next Uber Ride around Nairobi | #UberForLess

by Milicent Atieno
Uber wages Price War in Kenya: 35% Off your next Uber Ride around Nairobi

The Swahili people have a saying that goes something like this, ‘Fahali wawili wakipigana, nyasi huumia.’ In English, ‘when two bulls fight, it is the grass that gets hurt.’ That is the case for commuters in Nairobi using taxis, except instead of getting hurt when big wigs fight, they are benefitting from their fight.

Uber is essentially doing what economics would describe as ‘price war’, where a dominant player in the market sets up barriers for new players trying to enter the market. The Kenyan market has seen increasing number of mobile apps and web-based services for hailing a taxi, with the most notable one being Little Cabs.

Now, many players come and go with little to no effect on Uber’s dominance. However, Little Cabs is not just another player. It has the backing of Safaricom, Kenya’s leading telecom company and one of the most profitable companies in sub-Sahara Africa. Little Cabs powered by Safaricom, is a game changer, and potentially could unseat Uber in the Kenyan market.

It is effectively a rival for Uber,” said Safaricom CEO Bob Collymore to Reuters. “It is a local competitor, which will be cheaper and better for the local community.”

Uber has responded by waging a price war, and lowered its prices by 35%: for every kilometer ride on Uber taxi, commuters will now pay Ksh.35 down from the previous Ksh.60. In terms of minutes, passengers will now pay Ksh.3 per minute, down from the previous Ksh.4 per minute.

From Economics point of view, what Uber is trying to do is wage a price war on the new entrants into the market. Generally, companies struggle just to break even in the first few months or sometimes years of their launch. If an already-established and dominant player in the market wages a price war, it makes it extra harder for startups to grow roots and stabilize I the market they trying to enter.

In a statement to media, Nate Anderson, the General Manager of Uber Kenya said, “There are a lot of elements that calculate into a total fare. You have a base charge, a per kilometer and per minute. Apart from the last two, we have reduced the minimum fare from Ksh.300 to Ksh.200.

Anderson distant Uber’s move from the assertions that the lowering of prices was sparked off by the entrance of more online taxi-hailing services.

Our move is not by any chance motivated by the competition. Our focus is customers, and I think good competition will only be improvement in service provision to all customers in the market,” said Anderson.

Other than Little Cabs powered by Safaricom, Uber has other competitors like Maramoja, Mondo Ride, and Pewin Cabs. The competitors are aggressively signing up more drivers onto their platforms and marketing their services. There is no doubt that the price drop will reduce the take home profits for Uber drivers, but the company argues that this move will boost its overall demand, which will translate into more work equaling more pay in total for the drivers.

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