Uber’s Auto Shift: Without Commissions, How Will It Make Money?

Uber has introduced a driver subscription program, a departure from its traditional commission-based model of making revenues. While the change is drivers' welcome news in that it eliminates per-ride charges, it raises an important question: How will Uber profit from its business going forward?

The New Model: Subscription Over Commission

Uber's new policy is in tune with its competitors Rapido and Namma Yatri, who already have subscription models. Instead of charging a commission for each ride fare, Uber is now going to charge auto drivers a flat subscription amount to use its platform.

As per the report, an Uber spokesperson explained the rationale behind this shift, stating: 
“Given the industry’s shift towards a subscription-based model for drivers, we have decided to align our approach accordingly so as not to be at a competitive disadvantage.”

In this new model, the drivers will be receiving cash or UPI payment directly from the riders using the UPI ID of the driver himself. Auto rides will not be facilitated through Uber credits, card payments, or UPI payments via the app.

Under this new model, riders will pay drivers directly in cash or via UPI, using the driver’s personal UPI ID. Uber credits, card payments, and in-app UPI transactions will no longer be available for auto rides.
Uber’s Revenue Play:

Where Will the Money Come From?

With the commissions abolished, the Uber car business model now can be built on a variety of other sources:

Driver Subscription Fees: The simplest source of revenue will be the level of subscription fees that drivers pay to stay active on the platform. Uber can have graduated rates depending on features like priority matching on rides.

Promotions & Advertising: Uber can earn money from rider attention through in-app advertising, driver promotions, or top billing for paying extra drivers.

Selling Other Services: Uber can leverage its auto base to sell other services like cabs, bikes, and Uber Shuttle so that revenue is generated from other mobility verticals.

Monetization of data: With enormous mobility data in hand, Uber may opt for collaborations or insight-driven monetization strategies to capitalize on user and driver data.

Who Gains and Who Loses?

The biggest winners are car drivers, who now get to retain all their fares instead of handing over a commission. If they receive enough rides, a subscription for a fixed amount can be more lucrative.

For cyclists, the impact is indeterminate:

• Pros: Drivers' savings can be pooled to get lower prices.
• Disadvantages: Loss of fare standardization, online payments, and Uber credits. Riders will also expect more price haggling with drivers.

For Uber, this model can assist in retaining car drivers who would otherwise move to rivals such as Rapido and Namma Yatri. But profitability without commissions will necessitate a well-thought-out strategy.

A Turning Point for Ride-Hailing in India?

Uber's action signals a possible change in India's ride-hailing space, compelling Ola, InDrive, and others to reconsider their top lines. It could also affect regulatory control, especially in GST collection, since Uber will no longer directly process auto fares.

With automobiles being Uber's top-selling product in 2024, this shift redefines the character of platform-based mobility services in India. Whether this is a strategic shift or a revenue risk remains to be seen.

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