Shipping & Logistics

Uber to raise fares on fuel prices surge

Uber

Uber is expanding to five additional towns including Kisumu as the company steps up its growth push amid increased competition. PHOTO | AFP

Uber Kenya will increase fares in the next two weeks to calm its army of restless drivers who are demanding compensation for the increase in fuel prices.

Uber head of East Africa Imran Manji said the company is working on a price review to factor in the recent fuel rise.

Amid the rising cost of living and stiff competition in the ride-hailing industry, Mr Manji said the company is trying to find a ‘sweet spot between not destroying demand by pricing and ensuring that drivers cover their costs.’

The disclosure follows a rise in fuel prices by Sh9 per litre on Tuesday marking the fourth consecutive increase since February.

“We are looking at the pricing, and there is more chance than not that we will be reviewing our rates upwards in order to factor that fuel price increase,” said Mr Manji. Mr Manji declined to disclose the new rates.

Digital taxis’ drivers across the apps such as Uber, Bolt, Little Cab and Have in the past protested about the high cost of fuel eating to their earnings which have also declined due to a glut of drivers and players in the industry.

The cost of super and diesel is currently retailing at Sh159.12 and Sh140, respectively in Nairobi, setting the stage for further increases in the cost of living at a time inflation has hit a 27-month high.

The industry has since last year been reeling from reduced riding activity since the working from home measures and reduced incomes by individuals and companies during the pandemic in 2020.

This has been preceded by high cost of living with an increase in retail prices of major staples such as bread, milk, maize flour and cooking oils reducing disposable income.

The increase to be adopted by the tech firms is set to attain a balance in helping drivers cover their costs, make extra earnings and keep them on the app.

“It’s a difficult situation in the market right now because as the cost of living of everybody goes up, the affordability of things like ride-hailing comes into question. If we raise our prices too high; when the majority of people are already feeling price pressure on daily necessities, we are limiting how many people are going to be using our services and also limiting the driver of earnings,” he added.

“So the price increase has to be looked at in conjunction with what is the resultant effect on demand.”

The review by Uber will be the second after another change was made in February when fuel shock came in as the pump rises rose by Sh5 per litre, after withdrawing of a fuel subsidy cushioning Kenyans.

Fuel prices rose from Sh129.72 and Sh110.6 respectively in February, a pricing held for consecutive five months since October 2021.

Currently, the low-priced and almost default service for most Kenyans, Uber Chap Chap charges a minimum fare of Sh150 and a maximum of Sh250 per kilometre.

The more expensive Uber X charges a minimum of Sh200 and a maximum of Sh380 per kilometre.

“So with the analysis, will try to see if fuel is 35 percent of drivers typical costs and fuel has gone up by a maximum 10 percent, we are looking at a three and a half percent price increase,” he said.

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