New details have emerged showing that Uber was planning to further reduce commuter charges in Kenya, months after the 35% cut of 2016, which is the subject-matter of a civil suit filed by drivers against Uber BV and its local subsidiary.
Alissa Orlando, a former Uber executive in Kenya, said that she left the ride-hailing company in February 2017 after a period of contesting the additional price cuts, which the company’s management was actively pushing for. As the operations manager in Kenya, Orlando was in charge of launching new products across East Africa and negotiating partnerships with third-party companies like banks, amongst other duties.
In a verified affidavit that supports the drivers’ case against the ride-hailing company, Orlando said Uber planned to push down the minimum fare from the Ksh 200 (about $2 as per the 2016 exchange rate) it had settled at after a 35% price cut.
Orlando, who joined Uber in June 2016 from Rocket Internet (Jumia), weeks after the ride-hailing company instituted its first price cut in Kenya, said the plan by Uber to reduce the prices while retaining its 25% commission “was done arbitrarily and unreasonably without consulting the drivers and without due regard to the prevailing economic conditions.”
She left the company in protest.
“Due to the arbitrary nature of decision-making in matters involving drivers by Uber Kenya Limited and Uber BV, I decided to leave my position as Operations Manager in February, 2017,” said Orlando, who is now based in New York.
While Uber did not decrease its UberX prices, it introduced a lower-priced service dubbed Chap Chap in January 2018, which has over time become the default ride-hailing service in Kenya’s capital Nairobi, and set minimum fares at $1.
Orlando told TechCrunch during an interview that by the time she left, Uber had also reduced the trips per hour target from 1.3 to 0.9, as the company increased the number of cars and drivers using its platform, further dipping the drivers’ earnings.
“Average trip was about 3 miles or 20 minutes. I did some analysis and people were working 80 hours a week to take home $20 (after expenses), this was obviously shocking.”
To make up for the reduced earnings, Uber introduced incentives which were later withdrawn.
“There was the narrative amongst the team and at the company broadly that earnings would increase even though we’re cutting prices by 35% because it’s going to spike demand. But this meant the drivers worked harder and obviously, that ignored the fact that, that was for the same amount of money or even less. We came up with cash incentives to backfill earnings but this was done only for a few months,” she said.
But why did the drivers stay on the platform after the price reduction?
“There were fixed debt investments that were made into operating on the platform, the most obvious one being a vehicle. So, you bought a vehicle, and agreed to pay it off over five years. You have a fixed monthly payment. What do you do when the price is just cut? No one wants to buy your asset, or they want to buy it at a loss,” said Orlando.
“So, you’re stuck between a rock and a hard place. And this is why I’m so vocal against the vehicle solutions program, which Uber did with a local bank. They were trying to get people into $15,000 to $20,000 vehicles. You cannot pay back such a vehicle working at Uber prices.”
When Uber introduced its Chap Chap service (for cars below 1300cc), it partnered with banks to offer financing to drivers — hitherto employed by Uber partners — to increase car ownership amongst them.
Uber also set new limits (over 1300cc vehicles) for vehicles that could offer UberX service, while the rest were downgraded to the Chap Chap service — the service most customers wanted due to its affordability, and which, unlike UberX, had many cars.
She said after the price reduction in Kenya, the same followed across Uber’s markets in Africa, and other international markets. In places like New York, however, it faced some resistance as the city set the minimum rates for all ride-hailing companies.
In Kenya, Uber has over the years and on a number of occasions increased its rates to appease striking drivers.
Orlando’s affidavit, which was signed mid-November last year, came to light a fortnight ago after Uber sought to compel its drivers to solve the issues they had with the company through internal channels as prioritized in their contracts. Uber said that it was “improper” for its partners to seek legal redress without going through the established dispute-resolution mechanisms.
The drivers went to court claiming that the ride-hailing company breached its terms by instituting price changes without consulting them. Uber contested saying it had the authority to act independently.
Uber’s application follows a decision by the court last year confirming a relationship between Uber Kenya Ltd and Uber BV firms in The Netherlands, making them liable to their partners and paving way for a suit against the company in Kenya. Uber Kenya had sought to distance itself from the parent company to abscond liability for their actions in Kenya.