Lyft is introducing a new service that aims to curb one of the least popular aspects of its service: surge pricing.
The ride-sharing app is introducing a “price lock” feature specifically aimed at commuters to prevent the cost of rides from skyrocketing during peak hours.
Companies like Lyft and Uber use what is known as surge pricing, where the cost of a ride is adjusted based on demand at that moment and the availability of drivers.
CEO David Risher told analysts during a recent earnings call that the company plans to “blow a big hole” in the ride-hailing app’s “most hated feature.”
To unlock the fixed prices, customers must pay a monthly subscription of less than $5 “that caps the price for a specific route at a specific time,” Risher said.
“Reliable prices are extra important to them because they know what their ride will cost and they don’t like it when prices change,” Risher explains.
Lyft recognizes that its users hate surge pricing and is introducing a new feature to address it
The move is a direct challenge to its rival Uber, which also uses so-called dynamic pricing
The permanent price for the subscription has not yet been set, but for some users it will be $2.99 per month.
According to Risher, Lyft’s new feature won’t eliminate dynamic pricing altogether, but it could “reduce the frequency” and give travelers “a reason to choose Lyft.”
The move is a challenge to Lyft’s biggest rival Uber, which has been heavily criticized by customers for its high fares.
“I make the same trip to work five days a week and Lyft just offered me a $2.99 monthly subscription so I’m guaranteed to only pay $8.92 for my commute,” one user wrote about their experience on Reddit.
“I honestly did it because it seemed like a better deal, as opposed to the occasional $10-$14 on busy days,” they explained.
“I take a ride to work four or five days a week between 4:15 and 4:45 and they offered me a ride for $8.37, whereas before I was paying between $16 and $24,” said another positively about the subscription.
However, others reported issues with the price settings. One person complained that the price should have been set at $9.50, but it unexpectedly dropped back to $19.98.
“I checked to make sure I’m still paying the $2.99,” the Reddit user explained, but the price still shot up.
The new feature comes after Lyft cited a weaker-than-expected third-quarter outlook in its second-quarter earnings guidance.
Despite beating profit expectations, Lyft shares fell 17 percent.
The company’s shares have fallen 29 percent this year and are trading at about $10 a share.
Uber, on the other hand, had more positive results in the second quarter, posting revenue of $10.7 billion for the quarter, beating estimates of $10.57 billion. The company’s stock price is up 17 percent since the beginning of the year.
According to Bloomberg, Uber now accounts for 76 percent of U.S. ride-hailing spending, while Lyft accounts for 24 percent.