Muslims in Pakistan have celebrated the festive occasion of Eid last week and to further amplify the joy, ride-hailing companies including Uber and Careem maintained continuous surge pricing till 30th June.
Surge price or commonly referred to as peak price in Pakistan is a phenomenon where companies charge extra money from customers during the hours when the demand exceeds the supply of drivers.
In economics, high demand is controlled by increased prices and following the same principal, Uber and Careem charge more from their customers during peak hours. the extra money offered by these companies can more or less be categorized as a bribe to get back on the streets.
The kind of message the ride-sharing companies relay from such mechanisms is that they welcome the customers who can pay more while others can sit back, relax and try finding an alternative solution.
Also Read: How To Join Uber and Careem
Looking from the point of view of the companies, this logic may seem okay in writing, but its application is causing havoc on the passengers.
On 30th June, I chose Uber to take me from New Daewoo Station at Thokar Niaz Baig to my office the morning and though I could see quite a few cars on the map, the icon mentioned that rates might be slightly high.
After completing my trip I found out that I have been charged twice the actual amount and thanks to the removal of surge rate from Uber’s app I wasn’t even aware of how “slightly” more they will be charging me. So, instead of Rs. 262, which is a usual price for the ride, I paid Rs. 524.
Another colleague of mine decided to choose Careem to travel to nearby place from her home. To her surprise, she ended up paying Rs. 270 for a 3 KM trip from DHA Phase 5 to Lalik Chowk.
Unlike other taxis, these cab services are charging less occasionally but when the tables are turned, people end up paying more than they would ever pay for the metered cabs.
Last year, Uber came under fire from Indian regulators when the company was refrained from charging more fares from the customers at peak hours. Delhi Chief Minister Arvind Kejriwal sharply criticized surge pricing on twitter warning the company to impound the cars of those who’ll charge extra money.
Looking at the criticism of people around the world on their surge pricing practice, the company has updated its mobile app where it now shows the estimated cost and doesn’t reveal that by how much the actual fare has been multiplied by.
The Careem’s mobile application still shows that it will charge for peak factor but increasing the fares by 50% or more seems like rip off for customers who are being promised an economical and safe transport.
Mind you, from the start the marketing policies of the both companies have capitalized on the idea of providing cheaper rides to the Pakistanis and now they cannot turn their back and say, Sorry Folks!
Careem disregards the notion that surge pricing is looting the customers. Answering our questions the company’s representative responded;
“In order to match customer requests with cars, we need to get more cars on the road. We do this by increasing the rate that a driver will receive during these periods – this is when you see a PEAK price will apply message and a higher than usual fare for your journey will apply.”
“There is no obligation to accept this temporary price. You can simply decline to book and wait for demand to die down and for PEAK pricing to disappear,” he added.
When asked for a comment, Uber Pakistan referred us to an article on surge pricing present on their site which has not been updated ever since the company upgraded its mobile app.
The ride-hailing companies earlier this year came under heavy fire by Punjab and Sindh government for operating without registering the cars as commercial vehicles and not obtaining any fitness certificate. Now the government is trying to bring them under the tax net by altering their policies.
With all the controversies and scandals, Uber has completed 5 billion trips this month. The two companies have maintained their stance that the surge pricing encourages more drivers to come out on the road. Sadly, market efficiency does not guarantee customer’s benefit.
Even if the algorithm decides the surge pricing and its rate, there should be a price limit instead of an open ended cap for the ride-hailing companies that can ensure that the customers are not being exploited just because they are in need of a ride.
Market incentive surely is not a new concept but this action is ethically questionable when it is being done at the expense of the customers. Also, the black box of peak factor pricing needs to be made transparent for the people to ensure their peace of mind.