ECONOMYNEXT – Sri Lanka’s PickMe, a ride-hailing company had introduced surge pricing in November to bridge a supply gap during peak times, an official said, ahead of an expected initial public offering (IPO) of the firm later in 2020.
There had been speculation on social media that surge pricing was introduced to make PickMe attractive for public investors ahead of its IPO, but Marketing and Communications Head Gowshik Sathiyasiva denied such claims.
They also need to start making money now..since they planning for and IPO next year
— Isuru Suharshana (@suharshana) December 14, 2019
Sathiyasiva said surge pricing was introduced to encourage drivers and boost capacity.
“We introduced surge to match demand to supply and in order to achieve that we have to make sure that we match excess demand with the supply,” he said.
Sathiyasiva said surge pricing is still at a test phase and PickMe has not decided whether to continue the feature in the future. Customer feedback will be critical on the decision, he said.
Passengers told EconomyNext that they use PickMe because it is comparatively cheaper to Uber when the latter is on surge as demand outstrips supply.
Surge pricing incentivizes drivers, Sathiyasiva said.
“Apart from the salary we offer and the incentives, we give life insurance to our drivers and their family free of charge; it (surge) is in a way to help them earn more income.”
“This is not entirely about surge pricing but more of an incentive for our drivers to work too,” Sathiyasiva said.
During peak hours, PickMe drivers turn off their meter and charge higher prices from those travelling to the outer suburbs of Colombo, commuters say.
PickMe’s main competitor Uber had surge pricing since its Sri Lanka launch in 2015.
PickMe Founder Chairman Ajit Gunawardene last November was quoted as saying in Sri Lanka DailyFT newspaper that a public listing was planned for 2020 and, and the firm was worth 12 billion rupees before its fourth funding round, placing the ride hailing firm among the top 45 listed firms.
US-based ride hailing apps such as Uber and Lyft which went public in 2019 have seen big losses due to driver and rider incentives, insurance, research and other costs.
IPOs of both Uber and Lyft were flops. Prices of both Uber and Lyft had fallen after listing, and and investors have been pushing the firms to present plans to become profitable.
Analysts have said that new economy businesses are staying private for too long, and are pushing up their valuations through private fundraising rounds, which are being used to expand into new markets and accelerate research and development.
In the end, private investors profit at high valuations and dump the losses to public investors, analysts have said.