Careem and Uber have recently started to receive too many complaints from users. The reason is that the companies have started to charge users with an unusually higher fare. However, the chief reason behind the increase in charges is due to the shortage of vehicles and abundance of users.
The first time Uber started to roll out its peak factor charges, many users criticized the idea. Most of them started a social media campaign against Uber such as #neveragain, #BoycottUber, etc. Similarly, Careem faced such issues too.
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Service is worth the charges
As both Careem and Uber claimed to provide users with an affordable service, people have started to accuse them of making such false claims. On the other hand, there are people who are still satisfied with the surcharges. The reasons is the convenience Careem and Uber services provide. In their opinion, a service that brings your ride directly at your doorstep with air-conditioned vehicles is enough to justify the higher prices charged by them.
Editor at Aurora Magazine and a frequent user of Careem and Uber, Amber Arshad, said:
“It makes sense to give incentives to drivers for their time away from family during Eid holidays and even in rain; but after that, the peak shouldn’t be a consistent affair. It feels like a new type of transport mafia operating without any rules”
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Reason for peak pricing
Both ride-hailing services have stated that the peak factor is not meant to ‘suck’ the money out of their users. Actually, it is a mechanism to balance out the supply and demand of vehicles. This peak factor is a bonus for the drivers. It acts as an encouragement for them to stay on the road even when there are conditions like heavy rainfall, rush hours, etc.
Moreover, the maintenance of the cars isn’t provided by Careem and Uber. Subsequently, drivers have to pay for it themselves. The bonus they receive through this peak factor is then used to maintain and repair their vehicles as they get tired in the long run, operating non-stop from day to night.
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Vendor’s point of view
According to a person currently investing in Careem and Uber, it was told that during the recent rainfall days in Karachi, Uber’s peak factor went as high as 3.9x. This made him charge a customer Rs2,100 for a trip from Clifton to Gullistan-e-Johar whereas the usual rate for that route is between Rs344-Rs396.
The vendor said that despite the excessive charge, the customer cooperated and understood the risk the driver took to drive his new Corolla in the heavy rain and poor roads of Karachi city and paid the mentioned amount. However, all customers are not alike and some even refuse to pay the whole fee. Thanks to the wallet system introduced by Careem, the short money is transferred to the wallet of the user. Through this, customers have to pay it one way or the other.
On the other hand, there is no wallet system implemented by Uber and most of the times, reimbursements aren’t provided to the drivers which is a negative point for Uber.
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Policy shifts also responsible for price surcharge
Recently, vendors who wanted to register their hatchback vehicles for Careem were given a slot in the GO+ category of vehicles. However, after the registration and verification of many of these vehicles, there was a change in policies due to which the cars were downgraded to the GO category.
Uber did something similar as it used to give drivers a boost by paying them 60% of the total fares through its own pockets. Recently, this was decreased to a sudden 10% which resulted in the decline of income of many drivers.
Such policy shifts are also responsible for price surcharges as vendors decide to drop out of the services and withdraw their vehicles from these services, resulting in a decrease of available vehicles.
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New competitors
A number of new ride-hailing services have stepped in the game and are trying to take advantage of the disappointed users. They are advertising their services as ‘Peak/Surge-free’ services. A number of competitors in this field are Paxi, Optimus Now, and even Jazz mLift. The telecom company Jazz has also developed interest in the market and is launching its own ride hailing service.
Whether these can compete with Careem and Uber who have already made a name all around the world is yet to be known.
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Industrial strategies
Uber is following the same business strategy followed by Jeff Bezos of Amazon.com. Bezos let Amazon suffer losses for twenty years. They used to sell products on lower prices and investing all the earnings into new products and logistics. Amazon has been profitable for eight consecutive quarters now and has an annual sale of $100 billion.
Uber is walking along the same line and is aiming to invest heavily in the starting years on self-driving cars and pricing. This will enable the company to beat the competition and dominate the market. Uber has already reduced its losses from $991 million to $708 million in a period of just one quarter of the year. On the other hand, Careem has also sustained losses in order to provide affordability to its customers. But it has also raised $500 million through its investors.
Keeping the future in mind and performing such business strategies, Careem and Uber will always be one step ahead of their competitors. Although both services have received a lot of negative reviews from their customers, it’s all part of their strategy.
In the end, the only way to get rid of the price surcharge is for Careem and Uber to lure in more drivers and vehicles to meet the general demand of the public.
Source: Dawn
