Draft regulation for ride-hailing apps has dire consequences for industry

Updated 2016-10-26 10:52:12 Global Times

The pending implementation of new local government regulations on ride-hailing services in many Chinese cities has raised concerns that getting around could become more difficult. Experts said that the new rule could also have wide-ranging impact on the industry, striking a blow to car rental agencies that partnered with ride-hailing platforms like Didi Chuxing, damaging their estimated market value.

Wang Yue stood on the roadside in Wangfujing district, Beijing, on Sunday waving her hands frantically and ineffectually in front of an endless stream of traffic. It was 6 p.m. and Wang was trying to get back to her apartment in Yonganli, around 5 kilometers away.

A few taxies stopped, but even though their "for hire" lights were on, the drivers quickly rolled up the windows after hearing where Wang wanted to go. The trip was too short - and the fare too small - to be worth their time, Wang said.

After about 20 minutes and several refusals, Wang got frustrated and took out her mobile phone. She wasn't happy she had to summon a car with the ride-hailing application Didi Chuxing.

"The fare is about 1.8 times the usual amount on the platform, which makes the service more expensive than hailing a taxi, but I am out of options," Wang told the Global Times on Monday.

Draft details

If Beijing's taxi drivers have grown pickier about passengers, it's possibly because of the upcoming rollout of new municipal regulations for the online ride-hailing industry, Wang said.

In their current form, the rules, which are supposed to take effect on Tuesday, would force "the vast majority of drivers and cars" working for online ride-hailing services, such as Didi and U.S.-based Uber, off the road, said Liu Dingding, a Beijing-based independent analyst.

The move may help taxi drivers "regain their monopoly in car-calling service," he said.

A large number of private car owners drive for Didi Chuxing, accepting fares for driving passengers around the city.

China became the first major country in the world to legalize online car-booking services nationwide, after seven government ministries led by the Ministry of Transport jointly issued a regulation in July that will go into effect in November.

Back then, major players such as Didi Chuxing and Uber hailed the new regulation as a milestone in the industry.

However, the national regulation left it up to local authorities to impose eligibility requirements on the service providers. And when city governments rolled out their respective draft rules seeking public views in early October, they required ride-hailing drivers to be holders of local hukou (household registration) and cars that have local license plates.

The requirements can be a tall order in cities like Beijing and Shanghai. In addition, the new regulations also contain requirements for car specifications, making low-spec cars ineligible.

The relevant local governments have explained that the new regulations aim in part to alleviate the traffic that plagues many Chinese cities.

A public relations manager at Didi Chuxing said that the company's performance differs from city to city, but there hasn't been a significant drop in completed order volume on its platforms. But the manager also pointed out that the regulations haven't taken effect yet.

Taxi drivers have long felt the pinch from private cars offering roughly the same service, which has eaten into their market share.

"My driver said that his company told them to hold on for just one month until November 1, then it will all be over," Cheng Meng, a Beijing resident, told the Global Times on Monday, referring to a conversation she recently had with a taxi driver.

She also mentioned that fares on Uber, her primary ride-hailing platform, are almost as much as those of a taxi.

Deep impact

The pending implementation of new rules are also taking a toll on companies that provide vehicle rental services for online car-booking platforms, according to industry players.

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