Technology

Why digital drivers are shifting to offline mode

Uber

Uber has been using politicians to break into new markets, and dodge regulation and land laws, a new leak shows. PHOTO | AFP

A number of drivers under digital taxi-hailing platforms are opting to go offline as they switch back to traditional business models in the wake of shrinking earnings.

Digital taxi riding platforms including Uber and Bolt are yet to adjust their rates despite squeezed earnings for the drivers that form a larger chunk of the gig economy.

Fuel prices rose by Sh9 per litre this month, marking the fourth consecutive increase since February.

The cost of super and diesel is currently retailing at Sh159.12 and Sh140, respectively in Nairobi, increasing the cost of living.

Multiple interviews with drivers revealed that a number are now preferring to operate under the traditional taxi model, only using the apps to get clients, then cancelling the trip to negotiate rates with their clients directly. This has also seen them avoid commissions to boost their earnings.

“I prefer working offline. However you must have a client base. If I was making a trip from Imara Daima to the airport, I would charge between Sh1,000 to Sh2,000 compared to Sh300 from the app which is without lessening 20 percent commission and tax and yet you use the same amount of fuel. I will still need to pay the parking fee,” says Sam, who operates Bolt app.

“Offline removes the commission. If I go 10km or so and get Sh1,000 from the trip, I may spend Sh200 on fuel and have my Sh800 compared to when I have the app where I might up end up with just Sh500,” adds Mwangi.

Sam joined digital taxi business in June 2019 but has been undertaking it fully after a layoff as a State attorney with one of the public universities in August 2020.

“I came into this business because I didn’t have an alternative,’’ he adds.

“To be sincere, it has not been good as I expected. The clients are there but the rates are low.’’

When he started the business he would spend Sh3,500 in a week on fuel costs. This, he says, has increased to about Sh5,000 per week.

As fuel becomes costlier, some drivers are shifting to Little and Hava apps which charge 15 percent and 10 percent commission respectively.

Drivers also say their crisis has worsened due to price wars especially between Uber and Bolt, with each not willing to raise rates ahead of the other, in fear of losing riders to each other.

Uber has also been faulted for a higher commission at 25 percent and value-added tax that is passed on to riders and in turn the drivers’ earnings.

In one trip under Uber in March seen by Business Daily, cash charged and collected from a rider was Sh1,190, but the American company deducted Sh248 as service fee, Sh34 as booking fee, Sh46 as taxes on booking fee and service fee. The driver pocketed Sh862 from the trip.

Japheth 32, who is married and living in Uthiru, has been operating Bolt, Uber, Little and Hava.

“I stopped working with Uber in September 2021 because of the commission and their rates are low. I switched it off,” he says.

Uber can charge Sh420 while Bolt would charge Sh500 for the same trip as their commission is 20 percent.

‘’Hava is good but there is still no market for it yet,’’ Japheth adds.

Cars with fuel consumption at 650cc charged same price with 1300cc cars, which the drivers said was unfair, in addition to the vehicles posing safety concerns to riders.

Drivers have raised the alarm about the firms not factoring in longer trips and traffic jams that further cut their revenues due to higher fuel consumption and failing to get riders in some of those locations.

“I rather do contracted taxi job that would pay per minute. A trip to Kitengela may charge Sh800 to Sh1000. They don’t care how much you spent on traffic jam. The likelihood of going back without a rider is 80 percent,” Sam says.

“Sometimes you are forced to pick riders on the way charging Sh50 or Sh100 which they would pay a public service vehicle.”

Japheth rides 1200cc vehicle acquired through bank loan in 2019. Initially, he would make repayments of Sh25,000 per month but renegotiated with the bank to Sh12,000 per month after the pandemic struck.

“When the economy was good in 2019, I would make net earnings from Sh2,000 to Sh4,000 in a day but now I can even go negative especially if I get long trips,” said Japheth.

Currently, a car on Uber will bring Sh1,000 daily less fuel.

“From experience, Vitz currently retailing over Sh1 million will give you a net income of less than Sh15,000 per month. This means you will recover your investment after 5.5 years. Online taxi is simply a pyramid scheme,” he adds.

He counts costs in oil change, battery change, tyre change, car suspension services, maintenance, repairs, brakes, dents and lightings, which could be Sh150,000 every year.

‘’Initially, the business was good. But right now it’s tricky. If we don’t get the rates adjusted or fuel prices coming down, I will just park my car,’’ he adds.

Uber head of East Africa Mr Imran Manji said they would raise riding rates by end of this month amid an increase in fuel prices.

In an email communication seen by Business Daily in June, Bolt Kenya has said due to the review in June, drivers would be notified of any change.

“I understand how challenging it is to budget with your earnings, particularly in these tough times when fuel costs are a factor in your daily operations,” Bolt said to one of the driver.

“Please bear with us on this because the fuel price rise is out of our control, our team is deliberating on it and will make it right for you, our partners.”

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