MASSIVE LOSSES RAISE QUESTIONS ON UBER’S PRICING AND BUSINESS MODEL
(Posted 27th August 2016)
Pundits in East Africa with an eye on the global market development are speculating how the massive 1.27 billion US Dollars loss incurred by UBER in the first half of this year will affect operations, and market behaviour in the region.
UBER Kenya is engaged in a bruising battle with its main rivals, especially Safaricom backed ‘Little Cabs‘ following a downward revision of the UBER tariffs.
This not only brought about conflict with UBER drivers, whose well near industrial action forced the company to pay significant top ups to them, but also woke the proverbial sleeping dogs when other rival App based cab hailing services followed suit, negating the market impact of UBER’s action.
On a global scale is it the battle between UBER and rival LYFT making headlines with business news service Bloomberg and there as in Kenya right now has the strategy of lowering fares and then being forced to cough up money for top up payments to drivers eroded profitability.
‘Little Cabs‘ recent move to add market share by offering its services to non smart phone users by dialing *826# has heated up competition yet more as it now gives access to ‘ordinary‘ phone users to cab hailing services at equally low rates which smart phone users with a downloaded App have enjoyed for some time now.
A recent article, link below, has already looked at this development and the revelation of massive global losses by UBER will no doubt further rattle the company’s management in East Africa. Here they are faced with stark choices now, to either raise tariffs again to reduce top up fees or else find deep pockets to help finance the losses with fingers, toes and legs all crossed hoping the trend will bottom out and greener financial pastures return as was the case when UBER first took the market by storm.