This post is in partnership with Entrepreneur. The article below was originally published at Entrepreneur.com.
By Catherine Clifford, Entrepreneur.com
Uber has raised $1.5 billion in venture capital from more than 30 investors. That’s a lot of people who will be looking for a lot of money back. And, they are going to be expecting pretty impressive profits on that cash.
That’s why Uber’s move to launch — and now expand — a nonprofit product in China is a bit of a head-turner. The transportation technology company is beta-testing and expanding a product in China where it makes zero profit. Yup. Zero profit.
Called “People’s Uber,” the nonprofit ride-sharing service pairs up car owners with passengers and the only money exchanged is what the passenger pays the driver to cover the costs of the ride. Uber calculates this fee based on research of what it costs to own and operate a car globally.
The pilot program, which officially launched in Beijing in August, will expand to another six Chinese cities, according to a new blog post from the San Francisco-based transportation giant. Those cities are Hangzhou, Chengdu, Wuhan, Shanghai, Shenzhen and Guangzhou.
The nonprofit, ride-sharing technology that Uber is providing in China runs alongside its regular, pay-per-ride options in China. In fact, Beijing is one of the “fastest-growing” markets for the traditional Uber product.
The thinking behind having both a for-profit and nonprofit service exist concurrently is that there is an entirely different clientele who demand the “UberBLACK” option, which promises a “high-end sedan” to drive a client around, and those customers who would opt to take the cheaper, less exclusive People’s Uber product.
“It’s about choice – China has always had a ‘chauffeuring’ culture,” said Evelyn Tay, head of communications for Uber’s Asia-Pacific region, in an email to Entrepreneur.com. “Some residents will always prefer uberBLACK if a luxurious ride is more suitable for their needs. But for everyday use, some would take uberX or People’s Uber that’s equally convenient but cheaper.”
Also, operating the service is a way for Uber to up its brand awareness — and ideally, appreciation, if the marketing department did its job just perfectly — in an exploding economy that suffers with environmental air quality issues.
“Chinese consumers are known to be early adopters of technology, and municipal governments have acted quickly to support forward thinking initiatives that improve the city’s quality of life,” wrote Evanee Wu, a community manager at Uber, in the blog post announcing the expansion of the product. “These include initiatives to address social and environmental issues like carbon emission reduction and ride sharing practices.”
Not only is the People’s Uber product good for the environment — by reducing the number of cars on the road — but, If Uber swings it right, operating this zero-profit service could end up being an onramp to being the household transportation name in one of the biggest markets in the world. And that’s definitely not a zero-profit proposition.
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