Uber Offered 5% Commission To Compete with DiDi in New Markets

Uber Offered 5% Commission To Compete with DiDi in New Markets

Uber gave drivers a 5% commission in Australia but with a catch

DiDi launched into Australia in 2019 with a 5% commission in an effort to test and give drivers a better business model. This was a permanent feature in Australia even though they operate with a much larger commission of 20% in China. The model has worked successfully and DiDi is now swiftly looking to expand into 20 more cities in Australia by the end of 2020.

Uber owns a ~18% stake in DiDi and surprised their Drivers in Perth, Australia when Uber launched a temporary offer for Drivers of a small 5% service fee that can be unlocked after completing 50 rides on the platform. DiDi had been planning on launching in Perth with a 5% commission permanently only a week after this Uber promotion.

Does this mean Uber will fix their business model in the US as well?

This is still very unlilkely. Uber has operated in Australia since 2012 and the drop in fees to 5% was only a promotion that lasted one week. Uber continues to operate in Australia with a 22-27% commission on average while DiDi contiunues to rapidly expand its operations on 5% alongside.

Uber is expected to incentivize their Drivers in Australia but it is unlikely that the company will bring this 5% model back to the U.S. where it faces a legal battle due to the AB5 bill. The AB5 bill already threatens to make all of Uber drivers into employees which is too expensive for the company given its accumulated losses and no clear path to profitability till date.

The California state argues with the bill that their business model is unsustainable and the treatment of drivers is more employee-like than of an independent contractor. During this legal battle, Uber would not want to show the California state and U.S. riders that they are infact very capable of changing their commissions to 5% to help Drivers earn more after the COVID-19 shutdown, but will not do so because of poor financial performance today.

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