Uber Drops Prices in 16 Cities

Car service wants to stay competitive with rivals.

Uber CEO Travis Kalanick speaks at the Generation Now Inaugural Youth Ball in Washington D.C. The car ordering service's announced its prices would drop for its UberX service in 16 different cities on Thursday.
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Ordering a car with an Uber smartphone app came in handy for partygoers on New Year's Eve, though users might have been put off by the high prices on a busy night like that because of the company's algorithm that surges prices during busy times of day. Uber announced in a blog post on Thursday, however, that it is lowering prices for its UberX service in 16 cities to stay competitive, furthering its ambitions to expand and become the least expensive ride available.

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"More cars and drivers mean better coverage and lower pickup times," said Uber CEO Travis Kalanick in the blog post. "Lower pickup times mean better economics for drivers, and thus more drivers and cars. And we want to deliver that value to our customers."

Uber is cutting prices by 15-34 percent in Chicago, San Francisco, Seattle, Los Angeles, Phoenix, and Orange County, Calif. Additional price cuts will happen in Minneapolis, Atlanta, Sacramento, Tucson, Indianapolis, Denver, Dallas, Baltimore, Charlotte and Nashville.

Uber is growing fast with 550 employees and plans to employ at least 1,000 in 2014, says Uber spokeswoman Nairi Hourdajian. The company offers car services in 70 cities globally, with plans to expand to more, Hourdajian says. The company does not employ drivers or own any cars, but it partners with professional and commercially licensed drivers for Uber Black and conducts its own background checks, reviews of insurance requirements and driving records for its lower cost version UberX service, Hourdajian says.

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"The Uber app was developed to make sure people could get that ride when they wanted it," Hourdajian says. "Surge pricing provides an incentive for those drivers to come on the system to meet the demand."

There are obstacles to Uber's growth, including existing regulations for limo pricing designed to protect the taxi market in Miami, and lobbying opposition from the taxi industry in other cities. Uber's competitors in the car service on demand market include Lyft and Taxi Magic.

"This is not the first or the last time we will be doing a price cut," Hourdajian says.

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Updated 1/10/13: This article was updated to better characterize the company's profits.