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8 min read

    8 min read

    Last year, Uber began to give drivers in California the ability to see their destination and commission at the ping.

    In addition to these new features, Uber also allowed drivers to decline as often as they liked with no consequences.

    doordash

    It seems like most drivers reacted to these new features the way I did: waiting for longer rides with more earnings potential.

    This appears to have been a problem for Uber, one they are now rectifying with a new program called Drive Pass.

    While this will only affect drivers in California, this is another tactic Uber is using to combat AB5. As we’ve mentioned before, several other states are pursuing AB5-like legislation. If this feature and others like it is successful, Uber may roll them out to states considering similar legislation to California’s.

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    Uber Piloting A New Feature: “Drive Pass”

    uber drive passThis feature will be available for California drivers in select cities.  It is currently available in beta (they are testing it out) for some drivers in San Diego, Sacramento and Orange Country.

    There are no current plans to roll out this program to the rest of California.

    Drive Pass is a financial incentive for California drivers in the above cities to accept all rides. It allows drivers to purchase service fees upfront at a specific price that is not a percentage of the passenger’s fare.

    Basically, buy a Drive Pass for a certain number of rides, and you won’t pay any of the service fees.

    However, there is a catch. The catch is that the service fees you purchase upfront apply to ALL consecutive rides, whether you accept them or not.

    In other words, to use my earlier example, if I don’t want to drive 10 minutes to pick up a $5 ride, I will still be using up one of my pre-paid service fees.

    Clearly, the incentive for Uber here is to get more drivers to accept more rides, thereby maintaining their current level of passenger satisfaction.  Here is Uber’s explanation:

    uber drive passIt seems simple enough.  You can buy the Drive Pass for a certain number of trips which you must complete (or lose) within seven days.

    Therefore you need to be careful not to buy too many.  Fortunately, you can buy them in increments of 10.

    uber drive pass in actionDoing a little bit of math, if you buy the 10 pack, 50 pack, or even the 100 pack at the pre-discounted rate, you will be paying $3 per ride.

    Uber is not offering any volume discounts. Therefore you could buy the 10 pack and repurchase every 10 rides. If your average ride total fare is $12, then you would break even.

    At the currently discounted rate, Uber does offer a volume discount for the service fees.  However, we don’t know how long those discounts will apply, so for the purposes of this article, let’s assume the normal Drive Pass rates.

    At the normal rates, if your average ride total fare is less than $12, then you would lose money on the deal.

    If, however, you can get your average ride fare over $12, then you would be making more money with the Drive Pass purchase.  It seems the key to making this work is to get long rides as opposed to short rides.

    Here is an example provided by Uber:

    uber drive pass exampleI got curious to see how this would work for my driving style.

    I pulled my last twenty rides from my last day of driving on Sunday, February 2.  I prefer driving on the weekends because there is less traffic and therefore long rides on the freeway can move at 70 MPH.

    This is the quickest way for rideshare drivers to earn revenue.  In the San Francisco bay area, you can’t do that during the week.  With that said, here are the numbers:

    Want to see how your numbers stack up? Download Jay’s spreadsheet below!

    jay's drive pass calculations

    This is interesting.  Since I used my Navigation Filter to get more long rides, my average fare was $19.70, significantly higher than the $12 required.

    On this particular day, I would have earned an additional $38.52 using the Drive Pass regular pricing, and $84.52 using the Drive Pass discounted pricing.  That is nearly a 30% increase.

    But the one caveat is that you have to accept ALL your rides.  I probably decline, on average, one of ten rides, so the actual bonus would have been a little bit less.

    However, if I knew I was paying for those rides regardless, I probably would have not ignored any.  Either way, the actual numbers would have been a little bit less.

    Is Drive Pass Good for Drivers?

    There are several factors to consider when evaluating this new feature.

    The first is timing.  I don’t see how this feature would serve me if I work rush hour Monday through Friday morning or afternoon.  The rides tend to be very short as I ferry workers from home to work and then back again.

    With short rides less than $12, I lose money on the deal. It would seem that Saturday and Sunday would be the best days to purchase the Drive Pass.

    The next factor is your location. Where do you drive?

    I drive in San Francisco, where morning and afternoon rush hours are full of short rides.  Perhaps you drive in a more rural area of California and your morning and afternoon drives tend to be longer.

    The third factor is the pricing.  We know that an Uber ride in San Francisco costs more than an Uber ride in Oakland or Fresno.

    Will Uber price the Drive Pass by region, or will it be a flat rate across the state? As of right now, Uber has no plans to roll out this program to the entire state of California, but if they did, pricing could be an issue.

    The pricing in the three current areas is the same.

    Driver Pricing Strategies

    Just earlier this week, we announced Uber’s new set your own price feature.

    One strategy you could experiment with would be to set your pricing to 2X to ensure you get higher fares.

    Uber confirmed with me that you can use both features together in this way.  Perhaps you won’t get as many rides, but you will know for sure that they are profitable since the service fee is locked in at $3 per ride.

    You can also use your Destination Filter to assist you in getting long rides.  Here’s a short video on how to best use your destination filter:

     

    For example, in my market, I can set the Destination Filter from San Francisco to San Jose.  I may get three rides to get to the destination, all fairly long.

    Then I can turn around, use it again, and get multiple long rides back into San Francisco.  This tactic has worked well for me in the past.

    Key Takeaways

    There are still quite a few questions to be answered, however, this does seem like an interesting idea on Uber’s part. I’m hopeful that it will make drivers more but if it doesn’t, then I’d have to ask what was the point? Why add more complexity to a driver’s life if there is no financial benefit to the driver?

    This is an optional feature, so you can choose if you want to buy the Drive Pass or not. Given what I know about it right now, I would definitely buy several 10 packs starting on Saturday morning and continue to the end of my Sunday shift and see how it goes. But I’m worried that it would cost more for Bay Area drivers and Uber could raise rates in the future.

    Let’s assume the discounted pricing will be discontinued within a few weeks.  Then Drive Pass makes the most sense on the weekends when traffic is light and the trips are longer.  I would not use it during rush hour.  Clearly the price per ride which is based on the price for the Drive Pass ($30 vs $7)  makes a huge impact on your calculations.

    Finally, this feature is another example of how Uber exerts control over its drivers.  True Independent Contractors can set their own prices.

    Here, Uber is giving us an incentive in order to change our behavior in order to meet their objectives.  This is something a company would do with its employees.  It is not how a company hires and engages with a true Independent Contractor. So I think it hurts their AB5 argument.

    We will keep you posted as we learn more about this new feature and report to you on how drivers are using it to maximize profits.  Be safe out there.

    Drivers, what do you think about this Drive Pass for drivers? Would you buy a Drive Pass and would it make sense in your city?

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    -Jay @ RSG

    Jay Cradeur

    Jay Cradeur

    Jay Cradeur, a graduate of the Haas School of Business at UC Berkeley, is a full-time driver with over 26,000 rides. Jay has a driver-focused podcast: Rideshare Dojo with Jay Cradeur. When Jay isn’t writing articles or making videos, he is traveling the world. You can see what Jay is up to at www.nomadjay.com.