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Ridehail users often face the annoyance of opening the Uber or Lyft app, entering their destination, and facing unexpected high fares due to surge pricing. Despite customer complaints, Uber and Lyft argue that surge pricing attracts more drivers, enabling them to fulfill more trips and reduce wait times. However, with the expansion of robotaxis in the US, a question arises: why is surge pricing used for driverless vehicles?
Waymo, providing robotaxi services in areas like the Bay Area, Los Angeles, and Phoenix, implements surge pricing during peak times, as did its former competitor, Cruise. Since the robotaxi fleet is a fixed number, higher fares cannot increase vehicle availability as they do for Uber or Lyft. Instead, riders are left to pay the elevated prices if they can, or seek alternative travel methods.
The autonomous driving era suggests a need to rethink surge pricing, a staple feature of ridehail services. Since Uber introduced surge pricing in 2012, it has remained a controversial issue, with customers accusing the practice of price gouging, though such laws generally apply only in emergencies.
Drivers like Harry Campbell, who now manages The Rideshare Guy and The Driverless Digest, emphasize that Uber’s key focus has always been on reliability and minimizing wait times. Dynamic pricing helps ensure cars are readily available within a short window—an objective supported by surge pricing amid fluctuating requests and driver availability.
Proponents of surge pricing argue it invites more drivers to meet high demand, reducing wait times. Nonetheless, it also suppresses demand as higher prices deter some from booking rides, facilitating service for those willing to pay. Some states have proposed capping these price hikes, making surge pricing a standard aspect of ridehailing.
Waymo has adopted surge pricing, although it’s challenging to justify since there’s no capacity to introduce more vehicles to meet demand spikes, unlike Uber or Lyft. Critics argue destination prices simply rise when demand increases, imposing costs without enhancing availability.
Despite this, surge pricing still tempers demand, narrowing the gap between supply and demand during busy periods. Waymo, for instance, asserts temporary fare increases help manage demand and maintain wait times at reasonable levels—though this claim is debatable.
Brad Templeton, a self-driving industry consultant, argues that surge pricing, while beneficial in managing scarcity, creates disparity for those who can’t afford the fares, favoring the wealthy over others. Future plans might see human drivers supplementing fixed robotaxi fleets during peak times to balance costs and vehicle supply.
Different models suggest possible flexibilities, like Tesla utilizing Cybercabs for base demand, while private Teslas engage during peaks using surge pricing as a leverage tool. Another innovative approach could include shared rides with discounts, promoting efficient use of limited robotaxi fleets despite privacy challenges.
Presently, companies like Waymo can set peak-period prices as they wish, even with no extra vehicles available, a situation seen as part of the industry’s early developmental phase. Templeton advises patience and observation as the market evolves.
