Last week, Lyft announced that it had raised a massive $250 million round of funding as part of its effort to compete against other on-demand ride services. Now the company is going on the offensive against its competitors, with a price cut of up to 20 percent in all of its markets.
Lyft’s Spring Pricing initiative, which it is announcing to drivers in an email blast today, will lower the cost of rides for all consumers who use the service. But it won’t affect the amount of money that drivers take home. Instead, the company is temporarily suspending its 20 percent commission while testing out the new rates.
With the cuts, Lyft is making a big push to acquire users in a market that is being increasingly driven by the cost of getting from Point A to Point B. In January, Uber announced a similar fare reduction in 16 of its U.S. markets, which it claimed would make it the lowest cost provider for its users.
Just last month, Lyft introduced its “Happy Hour” pricing, which lowers rates in periods of low demand. The company has also been giving out free rides to users in newly launched cities as part of its “pioneers” program.
The new rates come on the heels of $250 million in new money that Lyft announced last week, from new investors that included hedge fund Coatue Management, Chinese e-commerce giant Alibaba, and Daniel Loeb’s Third Point. Existing investors Andreessen Horowitz, Founders Fund, and Mayfield Ventures also participated in the round.
That amount nearly matches the $258 million that Uber raised last summer, although Lyft’s funding came at a much lower valuation.
The new funding for Lyft will be used as it seeks to expand beyond the 30 markets that it currently operates in. But the money also gives the company flexibility to play around with its pricing in an effort to appeal to even more customers.