By invoking the lived experience of a simple three-kilometre ride costing 300 birr – and another 350 birr to return to the same point – one is forced to confront a deeper question: what exactly are consumers paying for? Urgency may justify the decision to ride rather than walk. It does not justify opaque pricing structures that bear little relation to underlying costs.
This is not merely anecdotal frustration. It is a classic case of market asymmetry – a concept long examined by economists such as Joseph Stiglitz. When consumers lack information and providers hold pricing power, markets drift away from efficiency toward exploitation. Ethiopia’s ride-hailing sector is showing early signs of this drift.
At the core of the issue is a growing disconnect between cost structures and consumer pricing. Consider the economics of electric vehicles (EVs), now increasingly used in urban taxi fleets. Charging an EV for a range of roughly 400 kilometres at a public station costs under 1,000 birr. At-home charging reduces that cost even further – often by half or more. This implies a per-kilometre energy cost that is dramatically lower than fuel-based alternatives.
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Yet, for the passenger, there is no observable difference.
A petrol-powered ride and an EV ride are priced almost identically. This is not cost-reflective pricing; it is rent extraction enabled by weak competition and limited regulatory oversight.
The implications go beyond fairness. When pricing fails to reflect lower operational costs, it also dulls the incentives that should drive the transition to cleaner technologies. EV adoption is not just about environmental benefits; it is also about efficiency gains. If these gains are not passed on to consumers, the broader economic rationale weakens.
Other markets offer instructive contrasts. In the United Arab Emirates, platforms such as Uber and local operators have experimented with differentiated pricing models for EVs. Lower running costs are partially reflected in fares, especially during off-peak hours or through promotional structures. While not perfect, these systems acknowledge a basic principle: when costs fall, prices should adjust, or at least competition should force them to.
Ethiopia’s ride-hailing market, by contrast, appears to operate under a form of algorithmic opacity. Surge pricing, platform commissions, and driver incentives are bundled into a final fare that consumers cannot easily interrogate. The result is a black box where trust erodes over time.
This opacity is compounded by limited avenues for redress. Consumers who feel overcharged often have little recourse beyond in-app complaints, which rarely provide clarity on pricing logic. In effect, dispute resolution mechanisms are embedded within the same platforms whose pricing is being questioned. This weakens accountability and reinforces the asymmetry between providers and users.
This is where consumer protection becomes essential – not as a constraint on innovation, but as a safeguard for market integrity. Regulators need not fix prices. But they can require transparency. Platforms should disclose how fares are calculated, distinguish between vehicle types, and justify why cost efficiencies – particularly for EVs – are not reflected in pricing.
For ride-hailing companies themselves, this is not just a regulatory risk; it is a strategic one. Consumer frustration, if left unaddressed, eventually translates into reduced usage, reputational damage, or informal alternatives. In a price-sensitive market like Ethiopia, perceived unfairness can be more damaging than high prices alone.
There is a smarter path forward. Platforms could introduce EV-specific pricing tiers, offer discounts tied to lower operating costs, or pass on savings through loyalty programmes. Such measures would not only align pricing with economics but also position companies as partners in Ethiopia’s digital and green transitions.
Markets function best when they are both efficient and fair. Today, Ethiopia’s ride-hailing sector risks being neither. The question is not whether consumers will continue to pay for convenience. They will. The question is whether they will continue to tolerate paying more than they should.
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Samson Berhane is an economics graduate with expertise in business and economic reporting and communications. He can be reached at [email protected]. The views expressed in this article are his own and do not represent the opinions of the institutions he is affiliated with nor that of the magazine.
