Car-hailing apps gain in popularity

Updated: 2015-05-25 10:36:25

Uber's offices in Chengdu and Guangzhou are raided and inspected as the company failed to abide by administration regulations. The ride-sharing service provider allegedly hired unlicensed private vehicles for business. [Photo/China Daily]

Controversial services draw ire of taxi drivers

With the spread of smartphones, traffic congestion, improved service and cheaper rates, Uber and similar car-hailing apps are becoming popular in China's major cities, amid a shortage of taxis.

The apps, which allow customers to submit a trip request to crowd-sourced taxi drivers, have challenged the traditional taxi business and are drawing resistance from taxi companies and drivers.

Such apps have been a topic of controversy nationwide because of the lack of relative laws and regulations.

The Shanghai Municipality announced on May 20 that car pick-up services ordered via the internet or mobile apps are legitimate, with the exclusion of Uber's car-sharing platform.

Earlier this month, Uber's offices in Chengdu and Guangzhou were raided because it failed to abide by taxi administration regulations. The ride-sharing service provider allegedly hired unlicensed private vehicles for business, which is illegal in China.

The US ride-sharing network, which is headquartered in San Francisco, came to China in 2014 and reportedly has an 11-percent market share. It has been under close scrutiny by authorities in many cities across the country.

Wang Dawei, a lawyer at Junhe Law Firm who was voicing his personal opinion, said, "China's authorities would inspect Uber's role and find out if the company aided or offered help for the private car drivers' violation of taxi administration regulations."

"Car-hailing apps match passengers and taxis (private cars), which improves the efficiency of the market," said Chen Xinlei, a professor of marketing at Cheung Kong Graduate School of Business, one of the top business institutions in China .

Taxi drivers don't have a decent income and social status as they have to pay exorbitant contract fees, said Chen, who blamed the unreasonable wealth distribution inside the taxi market as the main problem. The government acts in a negligent manner by simply raising the entry barrier and fostering interest groups, he said, rather than introducing market competition.

Chen said he worries the market may turn from one monopoly to another. He thinks the market will be taken over by one or two companies in the future, if car-hailing apps take over traditional taxi company's models and the market.

Chen suggests both the traditional taxi operation model and the new model should coexist but that taxi drivers should be paid more than at present.

Lack of national law

The Ministry of Transport said on Thursday that a reform plan for the taxi sector has been drafted and is open for public opinion.

There currently is no national law that applies to the taxi sector, but only local government and ministry regulations. All taxi permits and licenses are issued by local governments, who strictly control the number of taxis.

The Chinese taxi business is a specialized sector and strictly regulated in that companies must obtain permits to be taxi business operators; cars must have taxi licenses; and drivers must pass a test to qualify.

Drivers using Uber and similar platforms seldom have those qualifications.

Wang said there are not enough taxis to meet demand, and that leads to the operation of unregistered private cars.

Beijing had about 66,000 registered taxis last year, in a city with 17 million residents. The city expanded its taxi fleet for the first time in 12 years in January.

Shanghai had about 50,000 taxis in 2014, for 25 million residents.

Wang said, "When the amount of permits and licenses are far less than the practitioners who like to provide taxi services, the market loses control and vitality."

Local media said a new taxi driver in Shanghai could spend more than 50,000 yuan to buy a license to enter the business.

However, any car owner can join a ride-sharing platform free of charge by simply signing up and uploading their profile and document pictures.

Many former taxi drivers are among the early birds in the industry.

An Uber driver said he could make thousands of yuan each month, after tax, far more than he could earn working for a taxi company.

He views himself as a freelancer. "I take orders when I feel like working, or do something I need to do for my family, or just stay at home when I'm not happy.

"The car is mine. I pay only for what I need, instead of paying maintenance fees."

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