New Delhi: Ride-hailing service Uber is piloting a new pricing mechanism in India and the US under which it will disclose the exact cost of rides before customers book them—a move that may help it deflect some of the criticism over its controversial surge pricing practice.
Under the new scheme, Uber will show the price upfront to customers before they book a ride. Currently, Uber provides an estimated price range in some cities.
To arrive at the price, Uber will factor in multiple criteria such as expected duration of the ride, distance, traffic and toll taxes. During peak hours, when demand for cabs exceeds supply, Uber will also add a surge price.
The company has already rolled out upfront pricing for its ride-sharing service UberPOOL. It will now try out the new mechanism for solo rides in six cities in the US and five Indian cities: Delhi, Mumbai, Kolkata, Chennai and Hyderabad.
“The concept of upfront fare was introduced two years ago, when we launched UberPOOL. The upfront fare will change only under two circumstances. One, when a passenger applies a promo code. Second, when a passenger changes destination midway through the ride,” a Uber India spokesperson said.
Uber maintains that the new pricing mechanism is not a departure from surge pricing.
Experts said the new pricing mechanism may help Uber deflect some of the criticism of its surge pricing practice although customers will still complain if and when prices shoot up disproportionately.
“The problem with surge was it was too in-your-face and people felt that the high demand was being exploited. Upfront pricing model may not take the impact away fully as today’s customers are smart enough to decipher the actual cost of a ride. This cannot change the ‘mindset price’ for familiar routes like ‘to office and back’. For long distance travel within the city limits/and during rains, this may work because people are more bothered about availability than price,” said Sreedhar Prasad, a partner at KPMG.
According to the Uber spokesperson, upfront pricing will do away with the need to do mental math.
“Earlier you could see on your screen the surge factor, say a 2x or 3x. Now, surge will be factored in, but it won’t be on your screen. We are doing away with the mental math. The element of surprise and math is taken out and we are telling you upfront that we will charge you so much and you would have accepted the amount before taking the ride,” the spokesperson said.
In India, Uber and its homegrown rival Ola (ANI Technologies Pvt. Ltd) have drawn flak for surge pricing from consumers and state governments alike.
In the last few months, the Karnataka government impounded hundreds of cars affiliated to Ola and Uber following complaints about surge pricing by consumers
The Delhi government had threatened to crack down on Ola and Uber if they did not stop surge pricing, after a series of consumer outbursts on social media, especially in the wake of implementation of the odd-even road rationing plan. Uber and Ola temporarily suspended surge pricing in Delhi on 18 April.
The Maharashtra government may also abolish surge pricing following strikes by regular taxi drivers who alleged that surge pricing gave aggregators like Ola and Uber an unfair advantage, Business Standard newspaper reported on 26 May.