Uber Gives In To Critics, Cuts Prices In 16 Cities

By Sarah McBride

SAN FRANCISCO (Reuters) - Uber, the red-hot rides start-up known for jacking up town-car fares, is taking the opposite approach with its no-frills UberX service.

Fares on UberX, which offers rides in ordinary cars at lower prices than the company's high-end town car service, will be cut in 16 cities, Uber said in a blog post Thursday.

Chicago, San Francisco, Seattle, Los Angeles, Phoenix and Orange County, in southern California, will see the biggest fare cuts, the blog said. Ten other cities will also see cuts.

"We're going all-in on being the cheapest ride in town," Uber CEO Travis Kalanick wrote.

Under the new fare structure, rates in the Los Angeles area between Beverly Hills and Santa Monica would run $15.83 via UberX, compared with $26.80 for a cab, he said. In the Boston area, a trip from Beacon Hill to Harvard Square would run $12.55 for UberX, compared with $19.37 for a taxi.

Fares for the flagship Uber town car service, which generally run at a premium to taxis, won't change. The company has come under fire in recent months for its "surge pricing," under which it raises rates, sometimes by more than eight times, when demand is high.

Uber connects passengers with drivers via a smartphone app and makes money by taking a cut of the fare. It owns no cars itself.

It has entered more than 60 markets, ranging from its hometown of San Francisco to Berlin to Tokyo. Leaked financials in December indicate that the company, which began connecting passengers with drivers of vehicles for hire about 3-1/2 years ago, is generating $200 million a year in revenue beyond what it pays drivers.

Investors, led by Google Inc.'s Google Ventures, have given Uber around $400 million, valuing it at $3.5 billion. With a service that stitches together the buzziest categories in entrepreneurship -- among them mapping, smartphones and local services -- Uber is widely seen as one of the hottest properties in Silicon Valley.

Yet Uber still faces daunting regulatory hurdles that have left it shut out of major markets such as Miami. Lawsuits, many from taxi companies, are piling up, and competitors such as Hailo, Sidecar and Lyft are coming on strong.

(Reporting by Sarah McBride; Editing by Leslie Adler)