If you need to go somewhere urgently and are not in a mood to drive or if your car is giving you problems, don’t worry! All you need to do is open the Uber app on your smartphone and book a car. Your Uber car will be at your doorstep to take you to your destination in comfort. Uber has become a part of our lives and it is a brand whose name has become a part of our lexicon. If you have ever wondered how much does Uber cost and how does Uber decide its pricing, we have the answers for you. We have a guide that tells all you want to know about Uber and how the company prices its services.
The Uber success story
Uber is an American company that is in the business of providing ride services and ride sharing services. The San-Francisco based company operates in 63 countries across the world and offers its services in 785 metros in different cities. Travis Kalanick and Garett Camp founded the company in 2009. There is an interesting story on how the idea for starting Uber was conceived. Camp once had to hire a private driver paying $800 on New Year’s Eve. This experience motivated him to create a service that could provide cost-effective rides for customers. Uber started its services from 2011.
They launched their mobile app services in 2012, allowing customers to book an Uber ride using their smartphones. Initially, they offered luxury cars, but later on, launched UberX that allowed passengers to book low-cost rides. UberPool is a carpooling service that the company operates. They also offer a food delivery service called Uber Eats. Uber has more than 110 million users across the world using its services. They have captured the ride service market in the USA with a 60% market share. In 2018, they earned a revenue of $11.27 billion and have assets worth $23.88 billion.
Uber collaborates with car owners across the world, who can add their cars to the Uber worldwide fleet. Anyone who meets requirements, including a valid driving license can partner with Uber after clearing a background check. They can use their own car or rent a car to use for Uber. All Uber drivers are considered as contractors offering services. They would be added onto the Uber platform and can start offering their services to the public. Uber has mechanisms to ensure safety for passengers.
Uber has a rating system where both the driver and the customer would rate each other. The idea is to identify drivers who don’t provide good services and have complaints from customers. Such drivers are removed from the Uber platform. In the same way, Uber expects its customers also to be well behaved and would remove customers would have low ratings. Uber’s success story has led the entry to many a competitor. Despite competition and stiff opposition from local taxis, Uber has been growing from strength to strength.
How it works?
Availing Uber’s services is simple. Both customers and drivers would have the Uber app installed on their phones. When you need an Uber, all you need to do is select the location you wish to travel, the app would take your home location automatically using GPS location search. You would then get an estimate of the price displayed. You can check out different options like Uber X or Uber Pool depending on your preferences. Uber uses a dynamic pricing model. The prices vary depending on the demand. This is known as surge pricing. Surge is when there is a great demand for cars during peak hours like work hoursand weekends.
The price applicable at that time of the day would be displayed. If it is acceptable, then you can confirm. The Uber app would scout for drivers nearby and allot one of them for you. Both you and the driver would get notifications about this. The driver would then come down to your location. You can get on board and complete the ride. Once the ride is complete, the price would be displayed. You can pay using various options, including cash and card. Once the transaction is complete, you would rate the driver based on the service provided. At the same time, the driver would also rate you on your behavior with the driver and other factors.
The Uber pricing model determines the answer to how much Uber costs. While there may be slight variations from country to country, the basic pricing model is the same. It involves the following formula (as explained in their website):
Uber price = ((Base price + Time rate + Distance rate) * Surge factor) + Toll + Tips+ any other fee + any local tax
Let us examine each of the factors that determine the Uber pricing for your ride.
- Base price: This is the basic fee that is a fixed or flat fee. This covers the cost of picking up the customer.
- Time rate: This is calculated based on the total time taken for the trip.
- Distance rate: This is the total distance traveled from the time the trip commenced until the time the trip concluded.
- Surge factor: This is the factor that determines surge pricing. For instance, during peak hours a surge factor of 1.5 may be applicable, which means you need to pay one and a half times the regular price.
- Toll: This includes any local road tolls that have to be paid to the toll operator.
- Tips: These are tips payable to the drivers. This is usually optional and left to the customer’s discretion.
- Any other fee: In some places, a booking fee may be charged to cover the administrative expenses, including the cost of carrying out background check of the driver.
- Local tax: Depending on the place of operation, there may be local taxes applicable.
All these factors put together determine the pricing and this is used by the app to calculate the price. This is the pricing model, with each of the factors varying depending upon the country and city where the service is provided. Each of the pricing factors is determined based on local conditions. For instance, in some countries, there may be local laws that govern the minimum fare. This would need to be factored by Uber. Similarly, taxes would vary. Surge pricing factor depends on the demand. If the demand is more, then surge pricing would be applicable. The fee also depends on the type of vehicle. Luxury vehicles would obviously have a higher fee. When you opt for ride sharing, you would be sharing the car with other passengers who would all be dropped to their destinations based on the shortest route as decided by the app. The charges would also be divided among all the passengers and hence the final price you pay would be less.
As a customer, you can pay using different methods:
- Card – this includes credit card and debit card
- Online banking
- Digital payment and wallets like Google Pay, Apple Pay, etc.
- Gift cards offered by Uber
- Any other payment mode prevalent in the country/city of operation
Who benefits from Uber services?
The answer to this question is all the parties concerned benefit from services provided by Uber. Generally, 75% of the total price charged is given to the driver (excluding tolls and taxes that would be on actuals). Uber retains the remaining fee. The driver would retain any tips paid. Being a part of the Uber network is profitable for drivers. The amount they earn will usually not only cover their expenses but also help them make a profit. The more the number of rides, the higher they can earn. Surge pricing is beneficial for the driver as they can earn more during the time when there is a higher demand.
Uber services are advantageous for customers. In almost all places where Uber operates, their prices would be lesser than local taxi services. This makes it advantageous for customers. For regular users of Uber, the low pricing during most of the time would make up for surge pricing during peak times. Discounts are available for new customers for the first ride. Various promotional offers would be available for the benefit of customers. The biggest advantage for customers from Uber is convenience. Customers can travel wherever they want in a convenient way. This is the reason Uber is patronized by customers worldwide.
Uber would benefit as they get around 25% of the overall fee for every ride. Considering that there are thousands of rides happening worldwide at any time, it is a profitable venture for Uber. In most cases, their administrative fee would also be covered. The surge pricing would help the company make more money. Overall, it is a profitable business for Uber.
The Uber service is a win-win situation for all the parties involved. Drivers, customers, and the company would all benefit from the services provided.
Uber’s charges in different countries
The definitive answer to how much does Uber cost can be found out by a comparison of Uber services in different countries. This would help you get a general idea of how Uber prices its services. Uber has a price estimation tool that helps you understand how much Uber costs in different cities and different countries.
The following are prices for an Uber ride in cities across the world. The calculation is done for a ride of a distance of 5 km and is calculated using the US dollar for comparison.
- Philippines – $1.33
- India – $1.34
- Russia – $1.66
- Jordan – $1.76
- Argentina – $1.84
- Saudi Arabia – $2.30
- Brazil – $2.39
- South Africa – $3.29
- Bahrain – $4.14
- Greece – $4.67
- Hong Kong – $6.65
- Australia – $6.70
- Canada – $7.31
- New Zealand – $7.41
- United Kingdom – $7.46
- United States of America – $7.52
- Germany – $8.92
- France – $9.07
- Netherlands – $10.07
- Switzerland – $13.90
As can be seen from the above list, Uber prices vary from $1.33 to $13.90 from country to country. Even within a country, prices can vary from city to city. In a country like the US, prices vary a lot. For example, in New York, the base price of Uber is $2.55 with $0.35 charged per minute and $1.75 charged per mile. On the other hand, in Philadelphia, the base price would be $1.25 and the charges per minute and per mile would be $0.18 and $1.15 respectively. In Los Angeles, there is no base price and charges are based on a per mile price of $0.96 and per minute price of $0.15.
Uber costs thus differ from place to place, but in general, is cheaper than a taxi.