Ride-hailing app Uber on Tuesday scaled down operations in five out of six cities where it carried out operations in Pakistan, amid growing competition and record inflation that is showing no signs of abatement.
In a prompt to Uber users, the company said: “We have made the difficult decision to no longer offer the Uber services in Karachi, Islamabad, Faisalabad, Multan and Peshawar with effect from October 11.”
In its official statement, Uber said it will retain operations in only one city, Lahore where it will be launching more products on the app “to support earners during these difficult times.” The company operates ride-hailing and delivery services in Pakistan and has shut both the verticals permanently in five cities.
Meanwhile, Uber’s subsidiary Careem continues operations in 11 cities, including the ones where Uber has shut services and will likely be absorbing the influx of captains and customers affected by the shutdown in these cities. The shutdown prompt informed the customers that their details will be shared with Uber owned subsidiary Careem.
Careem has not disclosed details to Profit about the impact they see on their operations caused by the shutdown. and how this will affect their ability to compete with companies inDriver, now rebranded as inDrive, and Bykea.
The revolutionary ride hailing service Uber entered the Pakistani market in 2016 to solve the rampant mobility problem in an efficient manner. Both Careem, which entered Pakistan in 2015, and Uber invested heavily in Pakistan to drive a behavior change towards tech apps for ride hailing.
Both companies drove models which incentivized drivers and riders with hefty earnings and discounts.
A dicey situation
Both Uber and Careem have had to bring readjustments in their models to drive profitability which required cutting down driver bonuses and increasing margins charged to drivers by respective platforms, as well as reducing promotional rates for customers. The correction in the model decreased earnings of drivers and increased ride prices, causing a drop in the demand as well supply.
The increase in platform commissions also gave rise to instances of fraud where drivers, to increase their income, would find ways around the platform to avoid giving the platform any commission.
Both Uber and Careem have been understood to have been taking a hit on their market shares because of the pullback of incentives for riders and drivers. Ride-hailing overall was further ravaged by the Covid-19 pandemic, which decimated the supply as well as the demand.
To complicate matters for Uber and Careem in Pakistan, inDriver entered into the foray with zero percent initial commissions charged to drivers at a time when both Uber and Careem were increasing their margins.
