First things first, I wanted to write on this topic because an article by a fellow entrepreneur highlighted few things and missed out on others. It might be that he might have not experienced it, so in good spirit and to put into light many things which undergoes into surge pricing I am writing down my own experiences.
Like my fellow entrepreneur, I am also a decent user of Uber touching my 100th ride and have been interacting with drivers almost at all times. I remember signing up with Uber on the very day of their launch in Delhi, however, I actually took a ride with them after almost a year.
And I truly agree that Uber/Ola have single handedly taken many drivers and turned them into taxable citizens i.e they are able to afford many things which they never imagined thanks to their INCENTIVES.
Here, I would like to highlight the word incentives because this has seriously done some damage. It's like a secret sauce which has turned them into chosen warrior. It's a game which they play thinking that the last man standing will be the winner. It's a ploy which has turned them into unicorns. They really make sure that nobody understood this, they play with incentives almost at all times.
The famous investor who sits on the board of Uber had stated in his blog (Why Uber Won) that Uber was quick to understand how to get to liquidity by incentivizing the supply side i.e drivers ( it guaranteed drivers hourly rates and spent money to acquire drivers) & demand side i.e users (Uber subsidized fares and gave away free rides until there was enough demand and drivers could earn enough on their own). All this meant ~5 minute pickups for riders and ~$25 hourly earnings for drivers.
Now let us get deeper into the working.
My latest Uber booking was from Hyderabad International Airport at 8:00 AM and the driver was complaining that how he had to wait for 3 hrs. And if he had been in city he could have easily done 4-5 bookings by now. However, he was getting INR 25/km to & fro the airport, but still he was unhappy because he would not be getting incentives which are based on number of trips and peak times. The driver was so unsure of his future that he said he just wished his car loan gets cleared by the time they stop incentives.
And if you can step in to the shoes of driver, you can understand their insecurity. The driver earnings are reducing by 10-20% in some cases. No doubt there are cases, where the earnings have increased but nobody knows the percentage of drop/increase.
This booking was made by me from Chandigarh Railway Station at 8:00 PM and the driver was complaining that there is less demand for Uber in Chandigarh. I am not sure of this complain but Uber Go has slashed its price to INR 5/km to promote its usage. The driver was also saying how his earnings differ with drivers who are older users of Uber.
This booking was made by me from New Delhi Railway Station at 11:30 PM. I was at the station trying for cab for almost 30 min on both Ola & Uber. Uber had no cabs available and Ola had cabs only on Ola share. It took me 30 min to book the cab and at the end I got a cab on Ola share. I was the first passenger and boarded the cab. I asked the driver, why there are no cabs available, to which he politely replied that cabs are present as his cab was also registered under Ola mini.
Now, this surprised me because if the cab was available then I would have booked that and it would have cost me INR 600. And Ola would have got its share but when I booked it on Ola share it cost me INR 450 plus 2 other people paid around INR 400. In this case the driver got his share as per single booking not X% of all the 3 bookings.
Now assuming all these cases are true then it makes me think of one big concern i.e of Artificial Inflation in cab booking.
As a user, I have seen instances where I as a normal user i.e a user who has never accepted surge pricing got a cab at normal rates vs a user who regularly accepts surge pricing got at 1.X rate. Also, there are instances when slight change in location gives you cab at normal rates.
Also, assuming I am a rider and there is no surge in my area as the demand & supply are matching, I am happy to book Uber in this scenario. And now as a driver, I would definitely try to get maximum from my trip. And I will try to move to locations where there is surge. Now, for a user where there was no surge in his location, now there will be surge as the drivers are moving out of normal location and moving to surge location. This might be a hypothetical situation but surely a possibility.
Also, I recently bought a car and drove 500 kms in 2 months. If I had used Uber for my travel then it would have cost me 7*500 = 3500 for kms driven + 500*3 = 1500 for the time spent on travel + 100*25 = 2500 i.e INR 7500 vs INR 2500 (excluding wear & tear).
Again, imagining a situation where there are no incentives for the drivers (which are now more than 2X of what a rider is paying) and no incentive for the rider to board an Ola/Uber. I am not sure how the last man standing will actually stand.
PS: I don't use Ola much because there prices are exclusive of tax and using Uber drives down my travel cost by almost 20-25% since it does not care whether its an airport trip or normal trip plus there is always an added assurance of getting a good maintained cab in Uber. Also the response time of Uber customer care is almost 50% faster then Ola.