Tuesday, March 24, 2015

Uncertainty Surrounding Uber's Recent Vehicle Requirement Changes

It seems that Uber can't stop slashing prices! They recently slashed prices (again) by 20% immediately after changing their vehicle requirements for their drivers. Since its inception, Uber required that its drivers use vehicles less than 10 years old. The thought here was that this would attract a more upscale driver base which would be another reason Uber was superior to cabs. But Uber recently eased up on this requirement and changed it to a 15 year maximum for vehicle age. As Uber could have predicted this attracted a massive wave of new drivers that were previously unable to drive yet were eager to become driving contractors. This increase in driver supply has allowed Uber to decrease its prices again. Meanwhile many of the drivers with nicer, newer cars are fed up and quitting driving. But there is a large unknown here. How will the customer base respond to the changing demographic of Uber drivers? Will they ignore the change in the quality of drivers and their prospective cars and instead focus on the extremely low prices? Or will they shift to other ride sharing services like Lyft which has not lowered its vehicle age requirement? Uncertainties like this can make or break a business. While Uber has put a lot of faith in the thought that their riders care more about prices, there is still some uncertainty to this and they could pay the price if they are wrong.

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