Brightly colored rickshaws and yellow ching-chis have long been the most common modes of intra-city commute in most cities of Pakistan and Lahore is no different. The cab services were mostly limited to passengers commuting to and from airports or customers belonging to the upper-middle class owing to the high prices they charge. The dynamics of mainstream public transport changed when Careem and Uber launched around 7 years ago. The former entered the market in 2015 followed by the latter joining in 2016.
The apps started off promising to provide an affordable and convenient alternative to rickshaws and cabs. Uber is a San Francisco-based ride-hailing and food delivery company, operating in 570 cities across the world. Careem is a Dubai-based transportation network and ride-sharing company operating in more than 50 cities in the Middle East, South Asia, and Africa. Both ride-hailing companies have successfully managed to infiltrate the public transport infrastructure in Pakistan especially in the main cities such as Islamabad, Lahore, and Karachi. The convenience of being able to hail a vehicle of your choice through a few clicks on your phone in addition to saving yourself the hassle of negotiating the rates became an attractive alternative for a significant portion of the population especially amongst the middle class.
The Uber Careem merger
In March 2019 Uber acquired Careem for $3.1 billion. The Competition Commission of Pakistan (CCP) approved the acquisition after going through a Phase-II Order and imposing pro-competitive conditions in order to ensure that the merger does not monopolize the ride-hailing industry in the country. Amongst the conditions is the “no contractual exclusivity” condition which allows the captains to have the choice of offering their services on any ridesharing platform. Another condition is the imposition of a cap of 12.5% per year on the total organic fare charged to riders for a trip in order to protect consumers from being charged with unreasonably high fares.
The price surge is a pricing mechanism that allows increasing the fares during peak or rush hours. CCP has ordered Uber to put a ceiling of a maximum of 2.5 times as its surge multiplier which again shields consumers from unrealistic price hikes.
Despite the imposition of CCP conditions, the rates being charged by Careem and Uber have seen a significant increase over the last few years. Rabab a working woman and a frequent user of Careem and Uber in Lahore, as well as Islamabad, shares her experience, “I used Careem and Uber every single day while I was living in Islamabad between 2018 to 2020. I have undoubtedly noticed my commute expense to have grown much bigger during the time. Every time I allocate a certain portion of my salary to my commute expenses, I notice that my expense has been increasing constantly even though the route I follow from F-8 to my office in Blue Area or remained the same.”
She adds, “I rarely use Careem or Uber now, only when I really don’t have another but I have noticed that they rarely provide any promo codes similar to the ones they used to offer when I initially started using the cab-hailing apps. I recently went out for dinner with friends in Lahore. My route was from Askari 5 to MM Alam Road and Careem charged me Rs720. When I tried canceling the ride, even the cancellation charge was appearing to be Rs720. It’s ridiculous.”
Aun, a 27-year-old resident of Lahore is another disappointed user of Careem and Uber. Aun explains, “The companies have increased their share in the total fare per ride in order to maximize their profits. As a result, the captains have started resorting to a deceitful tactic in which they use IP Masking to increase the distance appearing to the rider but the Uber and Careem apps do not show this change. Hence, the remaining extra amount charged to the rider goes to the driver without the knowledge of the company itself. “
Aun added, “Even if there was no IP masking, I have paid amounts while traveling from Cantt to Gulberg which I could’ve used to travel to Gujranwala from Lahore- had I used bus service. These services are no longer economical.”
Careem’s rates vary from city to city.
Users who had contributed to the success of the cab-hailing apps a few years ago are now finding it difficult to continue using them without drastically denting their pockets. Furthermore, the rising petrol prices and inflation in the country are fueling concerns of making Uber and Careem even more expensive in the near future. If Uber and Careem continue charging higher prices, they will lose out on their customers. The question is whether these consumers will move towards new market entrants such as Airlift, Swvl amongst others or will they resort to the good old rickshaw rides.