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Uber Launches Ride Pass in 16 New Cities and Acquires Careem

Uber is launching their subscription service Ride Pass in 16 new cities in the US while also acquiring Middle Eastern ride-sharing rival Careem [1,2].

Ride Pass is Uber’s subscription service that allows Uber customers to pay a monthly fee of $24.99 to get discounted rates for all UberX, Uber Pool and Express Pool rides (which include electric bikes and scooters). Customers can lock in flat rates on all their Uber trips during the month. The rates will be heavily discounted based on historical data and will save riders up to 15% on their overall monthly travel according to Uber. Ride Pass fares won’t be subject to external circumstances like weather, traffic, or pricing based on demand. Furthermore, there will be no limit on the number of rides customers can take each month. For a limited time, riders will also get 30 minutes of free bike and scooter riding per day. This offer will be made available to 16 new US cities.

But Uber is also working diligently to take market shares in other parts of the world. It is now official that they will acquire Middle Eastern ride-sharing service Careem, who will be a wholly owned subsidiary of Uber but will keep the Careem brand and app intact.

The deal is expected to close in the first quarter of 2020 but is still subject to regulatory approval in the countries Careem operates which could prevent the deal from moving forward or force the companies to modify the terms.

 

Personal comments

Uber is still not profitable and drivers will not be paid any higher rate with the company taking the main loss. The new subscription business model is most likely intended to cover some of the costs as Uber is getting ready for an IPO.  It is still questionable if this is a reasonable business model for an on-demand service provider as prices are quite low especially if they acquire heavy users. However, apart from price, convenience is a powerful motivator for getting new customers, especially since the Careem deal will not be reflected in Uber’s first couple of quarterly earnings as they go public.

 

Written by Mahdere DW Amanuel, RISE Viktoria.

 

Sources

1. 2019-03-26. Uber’s Ride Pass subscription service is coming to 16 new cities

2. 2019-03-26. Uber buys rival Careem in $3.1 billion deal to dominate ride-hailing in Middle East