Uber’s NYC Travails Continue With “Surge Pricing” Fiasco

11.01.12 Andy Cush

Taxi- and black car-hailing service Uber has had its fair share of troubles in New York: first its taxi business was in, then it was out, and now it’s maybe back in again. Uber’s latest tribulation, however, has to do with the black car wing of its business. With the coming of Hurricane Sandy earlier this week, the company announced it would be implementing “surge pricing,” which, translated from corporate newspeak, meant it was temporarily doubling its prices. The company justified the move by saying that raised prices would provide more incentive for drivers, who operate as independent contractors, not employees of Uber, to work. Understandably, New Yorkers who rely on the service were upset–especially considering that the hike came just as the MTA went down and car services were becoming more necessary than ever.

Then, Uber did something noble. Yesterday, the service dropped surge pricing for customers, but continued to pay its drivers double–allowing users to pay the same rate, but continuing the incentives that kept drivers on the road. This, predictably, was not a sustainable business model, and today, Uber announced that it was reinstating surge pricing for customers. Here’s an excerpt from the e-mail that went out to the company’s NYC users today:

So while we were mostly able to avoid higher prices the day after Sandy, the reality is that under this week’s extreme conditions, raising the price is the only sustainable way to maximize the number of rides and minimize the number of people stranded – by providing a meaningful incentive for drivers to come out in undesirable conditions.

Later this morning we will be reverting back to standard Surge Pricing for riders. It is a hard decision, but one we feel strongly about. Without raising the price, there will be less than ½ the number of drivers on the system with several times more demand on far fewer drivers. Without Surge Pricing, Uber would become essentially unusable this week. For those needing a ride this week, it’s going to be expensive; there will be a clear pricing notification in the app at the time of request. During this emergency price increase, Uber will waive all of its own fees with 100% of the fare going directly to the drivers helping New Yorkers move around the city.

Did you catch that last bit? Though prices will go back up for customers, Uber is directing all revenue to drivers, not taking any of its own fees off the top. What at first may have seemed like a calculated, money-driven move, it turns out, really was for the good of the city’s many black car drivers and passengers.

(Photo: Wolfsburg RS/Flickr)