Uber and Grab's price war to attract more riders seems to be working in Singapore

SINGAPORE -- Ride-hailing apps Uber and Grab are locked in their latest price war, and early data shows it's working to get more "butts in seats", Uber said on Monday.

Uber's Singapore general manager, Warren Tseng, said in a press briefing that since the company cut its fares by 15% last week, it's noticed overall rides in Singapore have increased by 20%, and there was a 10% increase in new riders.

Tseng said the company decided to lower fares because its data supported the hypothesis that the move would convert new riders over from other modes of transport like traditional taxis. The more riders try new ride-hailing apps, the more they're likely to continually opt for it eventually if they form the habit.

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A week ago, Uber's main competitor in Singapore, Grab, also slashed its prices in the app. It lowered its starting fare from S$3.50 ($2.59) to S$3 ($2.22), and lowered the mileage charge from 90 cents ($0.67) to 80 cents ($0.59) per kilometre.

Grab's fare structure is different from Uber's. It displays a pre-calculated charge at the start of the ride, and doesn't adjust upward if unexpected jams occur. The fare is calculated based on distance and current demand and supply.

Grab's Singapore head, Lim Kell Jay, also told Mashable the lowered fares are expected to supply more riders to Grab's network of private drivers.

Both companies have said that the extra volume of riders is expected to help counter the lowered revenue per passenger, so drivers' earnings stay up. It's also clear that they're trying to subsidise some of the drivers' costs, by offering petrol discounts from tie-ups with fuel companies, among other items such as car insurance.

The cash option is helping too

Surprisingly, the new cash payment option that Uber opened two weeks ago is working, said Tseng.

He said that despite Singapore's 90% credit card penetration rate, cash is still favoured in an estimated 30% of day-to-day transactions. The company said two weeks ago that it hopes cash will open the service to riders like students, who might not have credit cards.

Since then, cash payments have been made in 5% of Uber's rides in Singapore, and this figure is expected to go up, he said. A third of first-time riders are also using cash, showing a possible reluctance to put in credit card data into the app at the beginning.

Tseng noted that most of the cash sign-ups for first trips are also coming out of residential areas located further away from the city, such as the further eastern districts of Simei and Tampines, and up north in Woodlands and Yishun.

Original image has been replaced. Credit: Mashable

A lot of Uber riders are part of demographic slices like foreign expats who are already accustomed to ride-hailing apps. Uber's lowered fares and cash strategy is designed to help the company reach a broader base of riders outside the city centre.

Grab has offered cash payment as an option from its launch.

UPDATE: April 26, 2016, 2:54 p.m. SGT An earlier version of this story stated that Uber saw a 20% rise in new sign-ups and 10% overall increase. The figures have been amended.

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