Uber raising prices amid driver tiff with Lyft

Uber Technologies Inc. is raising the price for some of its rides in an effort to incentivize drivers to pick up fares where competition from Lyft Inc. is particularly strong, according to Needham & Co. analyst Brad Erickson.

The company’s already higher minimum fare rate in most of the cities with Lyft is a “key tool for keeping drivers engaged in the densest markets,” the analyst wrote in a note to clients. The issue of driver recognition and related compensation has been a critical concern for investors at both companies.

“We think the market misperceives what Uber’s efforts around driver incentives really aim to accomplish over the longer term,” Erickson said. Bearish arguments seem to centre around increased competition and a lack of demand, forcing the company to incentivize its driver supply. However, the analyst argues mobility services are still competing against a formidable adversary, which is more than 100 years of car ownership. “This makes excess driver supply critically important in compelling the initial behaviour change for would-be drivers.”

Drivers have always been an important, as well as a contentious component of the ride-hailing business model. Legislation concerning “worker status” such as a recent California Assembly bill has the potential to be a longterm threat to Uber and Lyft’s businesses as well, Wedbush analyst Daniel Ives said.

Bloomberg