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Lyft plans to eliminate controversial surge pricing

by John Biggs

Lyft, the popular ride-hailing platform, is gearing up to eliminate the much-maligned surge pricing, a move aimed at bolstering its user base. During the company’s Q2 earnings call, CEO David Risher acknowledged the widespread disdain for surge pricing, which he described as a “bad form of price raising” that riders detest “with a fiery passion.”

The surge pricing model, known within Lyft as Prime Time, is activated during periods of high demand and insufficient driver availability. The premise is to incentivize off-duty drivers to get behind the wheel and earn extra, thereby balancing supply and demand. However, this model has been met with significant resistance from riders.

 Risher stated, “We’re trying to really get rid of it,” attributing the decision to the company’s robust driver supply, which has been a focal point of their efforts. The surge pricing has seen a considerable decrease as a result. A spokesperson for Lyft revealed to TechCrunch that the company’s driver supply is at its highest in three years, a milestone reached since the advent of the COVID-19 pandemic. The driver base has expanded by 20% YoY, and the average hours worked by each driver have surpassed 2019 levels.

According to Risher, these factors have contributed to a 35% reduction in rides affected by surge pricing compared to the previous quarter. While this decision may lead to a dip in Lyft’s earnings, Risher believes it’s a win for the riders and the market at large. To remain competitive with Uber and attract more riders, Lyft has been cutting prices, which led to a 5% decrease in revenue per rider from the previous quarter. Nevertheless, the strategy seems to be working as the number of active riders has increased by 9%.

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