Private car hire service Uber has big plans in China — but it seems like the company is truly facing its toughest challenge yet in the market, after it announced that it has cut its prices in Shanghai by 30 percent, and slashed the base fare and minimum fare by half.
Uber is positioning itself as a premium service in Asia — where regular taxis are substantially cheaper — but this price slash could narrow the gap, as an email to its Shanghai users explains:
Uber is about being everyone’s private driver, and that’s what this is about. For less than the price of a latte, you can now have an Audi A6 waiting for you when you get outside to take you to work.
For example, a one-way trip to Shanghai Pudong International Airport will now cost CNY350 ($58), as opposed to CNY600 ($99) under the previous pricing system. Comparatively, a taxi costs approximately CNY150 ($25) from Pudong International Airport to People’s Square, the center of the city, according to a China travel guide site.
Uber finally launched in China in August last year after it began a test phase in Shanghai, its first city in the country. It is also currently operating in two other Chinese cities, Shenzhen and Guangzhou.
An Uber spokesperson told TNW that the price cut affected only Shanghai this time round, as the company seeks to make “prices as accessible as we can for users while still keeping them high enough that partner car companies are motivated to use Uber.”
When we learn more about the economics of the industry in new cities, we often see opportunities to adjust Uber prices; lower prices is a trade-off we will always take when we can.We saw this opportunity in Shanghai as we have in Taipei, LA, San Francisco, and a number of other cities around the world in recent months.
China is an obvious target country for Uber, which is expanding globally aggressively, but it faces stiff competition there. Taxi finding services are on the rise in China, as shown by the recent $100 million funding round secured by Didi Dache, from investors that included Chinese Internet giant Tencent. Previously, e-commerce giant Alibaba invested an estimated $1 million in Kuaidi Dache in April last year, while car rental firm Yonchi — which runs Dache Xiaomi — was said to have landed a round in the ‘tens of millions of dollars’ bracket.
It isn’t clear if Uber has cut its prices in Shanghai to gain a more equal footing to compete with rivals, or if the market is just very small at this early point and it is trying to reach out to customers more effectively.
Regardless, the presence of strong competitors, cheap taxi prices and regulatory obstacles make China a difficult market to crack — and it seems like to combat such issues, Uber is taking the obvious way out: to cheapen its services and hopefully appeal to a greater mass of people.
Headline image via Mark Ralston/AFP/Getty Images