Here’s a quick anecdote about the puzzle that was the Uber business model in Bengaluru. I visited Bangalore — the city I am from — earlier this year. I’ve been used to driving my parents’ car around town while visiting; for the first time, though, the consensus opinion from friends and family was that I should Uber the entire time instead. I’m a fan of convenience, so I agreed.
Reliable, useful journalism needs your support.
Over 600 readers have donated over the years, to make articles like this one possible. We need your support to help Citizen Matters sustain and grow. Please do contribute today. Donate now
It was pleasant enough: the cars were new, clean and shiny; prices were cheap when paid in USD; cars were abundant. Practically all the drivers were local Kannadigas who had quit jobs in the service industry to buy their own cars.
At this point, I discovered that Uber’s business model there was even more ruthless than I expected — enough so that I was worried for every driver who drove me.
Uber was clearly looking to corner the market; to do so, they weren’t paying drivers what they do in the rest of the world, i.e. the larger percentage of the fare the passenger actually paid. Instead, they were paying drivers an escalating amount based on the number of trips they completed in a day, irrespective of the actual length of each trip. For example, a driver got paid nothing for completing 10 trips; ₹1,000 if they hit 12 and stopped there; ₹2,000 if they hit 15; and something obscene like ₹5,000 if they hit 20 (capped around here).
What this meant was that a lot of cars were on the road all the time, all the drivers were working long hours, and all of them were easily making their car mortgage payments.
The nub, though, was that no driver actually seemed to be aware that this pricing model would change soon. Not one driver actually knew of Uber’s standard international pricing model, and Uber sure as hell hadn’t told them about it yet. Practically all of them had effectively mortgaged the cars I sat in; that led to interesting conversations about the economic model of their investments, and earnest attempts by me to convince them to pay off their car mortgages as soon as humanly possible, before the shit hit the fan.
It’s been six months since I visited. I wonder if the payment model has changed yet. If Uber has in fact cornered the market by now, and started paying drivers 70% of passenger payments for every trip (while also unilaterally cutting fare levels, like they always do), then it effectively leaves a lot of earnest folk struggling to pay off their primary asset.
At least I’ll get an easy ride.