The war between Uber and the cab drivers of New York City has been ugly, but now Uber (UBER)’s running a risky new play to undercut yellow cabs and convert more New Yorkers to their services.
Uber is cutting 20 percent off all UberX rides for a limited time, which by Forbes’ estimate means that Uber is losing money on these rides. It’s scorched earth tactics: starving out the competition by taking a major loss.
By Uber’s measure, the fare cuts should be just enough to bring most rides from being a few dollars more than the price of a cab to just barely less.
But what that does that mean for Uber drivers, who likely didn’t have a vote in the price cut decision?
“What we’ve seen in cities across the county is that lower fares mean greater demand, lower pickup times and more trips per hour — increasing earning potential and creating better economics for drivers,” Uber said in their blog post this morning.
Another way of putting it is: we don’t know if they’ll be paid less, but they definitely get to work more, which should pay off “in the long run,” as Uber puts it. That’s easy to say for a company that keeps collecting checks while its drivers have to hustle harder to make the same money.
But hey, whatever it takes to convert new customers, right?