For people who have been using Uber for several years at this point, it’s becoming more and more obvious just how much the prices on the platform have gone up.
We’ve also noticed these changes, so we looked into it and made a list of the top 11 reasons why Uber is so expensive now, so keep reading to find out!
Why Is Uber So Expensive In 2023?
Uber is expensive because it’s chasing growth and profitability, both of which require higher revenues in 2023. Uber also hikes prices in line with dynamic and surge pricing at different times of the day when demand increases. As well, external factors that affect the prices of Uber include rising rates of inflation and laws in effect wherever the company operates.
Read on to find out the leading reasons why Uber is so expensive now, including a closer look into the external and internal factors listed above and more!
1. You’re Paying Extra for the Convenience
When you use an on-demand product like Uber, you’re essentially hiring the driver for a service where they provide their time and resources.
Uber considers this convenience worth a lot of money since it’s what the company is built on, so the customers have to pay extra for it.
Overall, having what is basically a cab that picks you up from wherever you are and allows you to pay in a wide variety of options right from your phone is considered a luxury by the company.
2. Uber Is Chasing Profitability
Uber is still a long way from profitability, and having high prices on its platform is one way of boosting revenue in pursuit of it.
Even though Uber has managed to turn a profit in recent months, profitability is still a long way out, even if the company hasn’t announced when it expects to hit the goal.
Profitability is different from profits in that the former is relative and long-term, while the latter is absolute and measured in the short term.
A company realizes profits if its earnings are greater than its expenses, no matter how small the difference.
Profitability is only attained when the profits are more in line with a company’s size, can be sustained over a long period of time, and not as many resources have to be spent.
In Uber’s case, profitability would be attained if the company can sustain profits of billions of dollars over several years.
One of the key ways in which the company can pursue this goal is by charging the customers more in order to increase revenues.
In the past few years, inflation has hit every country in the world so, no matter where you are, Uber prices have gone up as a result.
Specifically, one of the direct ways that inflation hits rideshare costs is when gas prices go up, so drivers’ expenses also increase.
Therefore, in order to make sure that the drivers still see the gig as worthwhile, Uber would need to increase how much they make, even if it’s by a small amount.
4. Surge Pricing
Uber uses surge pricing to increase rates when demand rises, e.g. during evening rush hours when people are getting off work.
These surges are intended to push drivers to do more work to address the demand, but they’re also an opportunity for the company to make more money.
So, if you’re regularly requesting rides at the same time as several other people, dynamic pricing might be the reason why you always get high prices.
5. You Live in an Expensive Area
In places where the cost of living is high, Uber prices will also be more expensive than in other areas.
For example, Uber rides in small towns cost less on average than they do in major metropolitan cities.
6. Additional Surcharges
Uber sometimes charges its customers extra where the money is intended to go to something other than the usual expenses.
For example, Uber introduced a surcharge in the US that was going to be given to drivers in order to address rapidly rising fuel costs.
Uber also has an option called Uber Green that only uses hybrid and fully electric vehicles to provide rides.
In this program, drivers who use fully electric vehicles get an extra $1 per trip up to $4,000 a year as an incentive to push more of them to adopt the technology.
7. Uber Needs to Show Investors Growth
As a publicly-traded company, Uber is accountable to its investors and has to give regular reports on its finances.
In order for the investors to keep their money in the company, these reports need to display growth, especially in revenue.
One of the most reliable ways to maintain this growth would be to increase the charges levied on the customers.
8. Uber Can’t Rely On Tips
Uber gives 100% of the tips to drivers, so these cannot be relied on as a steady source of revenue.
For this reason, the company would have to increase charges elsewhere, e.g. service fees.
9. Uber Needs to Account for Third Parties
In maintaining its operations, Uber needs to use services from third parties such as payment processors and online hosting.
These services charge different fees, e.g. payment processors take a cut of every transaction, so Uber would need to charge customers more to maintain favorable margins.
10. Funding New Projects
Aside from third parties, Uber is always looking to fund its own internal projects. One of the most well-known ones was research into self-driving cars.
11. Accounting for Certain Laws
Wherever Uber operates, there are different laws in effect, some of which need to be addressed with money.
State and federal taxes are some of the most straightforward laws that require Uber to pay out some money.
In the places where it operates, Uber also needs to be licensed by the local authorities and this also requires payment.
Additionally, Uber also regularly ends up in court, fighting cases, and has to spend a lot of money on legal fees, something that is accounted for when setting prices.
Uber is more expensive now than when it started out, due to different external and internal factors. Some external factors are inflation, which affects the cost of doing business, and different laws. Internal factors include chasing profitability and surge pricing.
Uber also adds surcharges for additional expenses. For example, Uber pays drivers who use fully electric vehicles $1 more per ride, up to $4,000 a year, and this makes rides in these vehicles more expensive by default.