The new fares are:
with a $5 minimum fare.
This compares favorably to San Francisco taxi rates:
$3.50 Base + first 1/5 of a mile
$0.55 per fifth of a mile ($2.75 mile)
$0.55/minute of waiting or traffic time delay
$2 airport surcharge
Uber claims that they are cheaper than taxis or any other ride sharing system in every city that UberX operates in. There are 24 cities with UberX service.
Moreover, they claim to be cheaper than the bus if you share the ride.
The reason for lowering rates is economies of scale:
The answer is in the network effects of our business. More cars and drivers mean better coverage and lower pickup times. Lower pickup times mean better economics for drivers, and thus more drivers and cars.
Uber getting cheaper means more people will use it for more types of trips, which may help futher decrease costs or improve service, as long as the supply of drivers keeps up with rider demand.