Uber’s Guangzhou setback a taximeter of its China operation

May 08, 2015 15:34
Uber users won't mind paying more for a comfortable ride but regulators won't tolerate unregistered taxi drivers. Photo: Internet

Thanks to taxi-hailing smartphone applications, many taxi drivers in mainland cities have decided to go it alone instead of working for cab operators.

A cabbie working on his own for eight hours a day can earn at least 7,000 yuan (US$1,128) a month, which is around 1,500 yuan higher than the earnings of someone who is not using the app.

On top of that, the app allows the driver to save on gasoline and take a rest when there are no passengers, instead of driving around looking for clients.

But taxi drivers and passengers in the southern city of Guangzhou who consider the app a blessing hit a roadblock at the end of last month when local authorities launched a clampdown on Uber, one of the taxi-hailing apps.

Officials from the public security, industry and transport departments raided Uber's office in the city on April 30, alleging the company was operating “unlicensed transport services”.

They said some of the Uber cars and limousines are privately-owned or rented, and therefore unregistered.

Authorities keep a tight rein on public transport services through a strict licensing regime that bars private vehicle owners. The penalty for unauthorized taxi services is capped at 30,000 yuan.

Under such a regulatory regime, taxi service has become a monopoly where the government decides the number of taxi licenses to be issued – rather than auctioned – to taxi firms, which are usually state-owned or controlled by relatives of cadres.

A taxi driver has to join these firms and pay them part of the day's earnings – usually calculated at 200 yuan per day.

Since licenses are limited, licensed operators make a lot of profit. But this doesn't work well with passengers in major cities like Guangzhou who always find it hard put to grab a taxi during peak hours.

Guangzhou has 24,000 taxis with a population of 15 million. By comparison, nearly 20,000 taxis are running in Hong Kong, whose population is just half of Guangzhou's.

There have been calls for authorities to promulgate new rules that will allow private car owners to enter the market. Further vehicle safety and driving skill tests could be required just as long as freelance operators are allowed to enter the business and alleviate the problem.

The emergence of Uber and other taxi-hailing services is adding pressure on the authorities to ease regulation and introduce fair play in the business.

But apparently, Guangzhou authorities are not about to relax their grip. In fact, the municipal transport commission is planning to launch a government-run taxi booking app to serve passengers.

But why is Uber being singled out in the clampdown? Observers say it has something to do with Uber's business model.

Didi and Kuaidi, China's leading taxi-hailing apps which merged last year, are platforms that facilitate the more effective use of registered taxies, similar to the role of online travel and hotel booking agencies like Agoda.

Uber, on the other hand, allows private car owners to join the taxi service. Its role is likened to that of Airbnb, which rents out lodging in private homes.

Didi and Kuaidi can explore ways to share profit with traditional taxi firms but Uber is seen as a subverter in a still heavily regulated and monopolized sector.

Another possible factor is that both Didi and Kuaidi are homegrown services backed by two of the country's biggest technology giants, namely Tencent and Alibaba, which are in a position to establish rapport with the government.

It remains to be seen if regulators can become more accommodating to new business models like crowdsourcing that could hurt vested interests.

Uber’s Guangzhou setback is not unique. The service is also encountering similar difficulties around the world, including protests and boycotts in London and Chicago and government clampdowns in France, Spain, South Korea, Thailand and India, among other places.

Uber's ultra-low pricing policy could also explain much of the hostility towards its service.

The company is trying to expand its user base in China by keeping fares down. The lowest fare chargeable is just 9 yuan for the first 5 kilometers and 1.6 yuan for every subsequent kilometer, lower than the fare levels of registered taxies, according to the Guangzhou-based Southern Metropolis Daily.

Understandably, registered drivers still hired by taxi firms, who have to stick to the fare ranges set by the municipal government, are crying foul.

Perhaps Uber should focus more on the high-end market.

One Uber participant who offers her Mercedes-Benz M-class SUV for hire, told the newspaper that there are high-end clients in the central business district whose transport needs Uber could tap.

She notes that with the government's intensified campaign against drink driving, many well-off city residents would rather leave their expensive cars in the garage when they go out to parties and they wouldn't mind paying more for high-end taxi services.

Uber now operates in Beijing, Shanghai, Guangzhou, Shenzhen, Wuhan, Chengdu, Chongqing, Tianjin and Hangzhou, all affluent cities with sizable clusters of white-collar professionals and executives.

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Uber's office in Guangzhou was raided by local watchdogs and remained closed last week. Photo: Weibo

EJ Insight writer