Le­gal­ized ride-hail­ing in­dus­try must be sus­tain­able

China Daily (USA) - - VIEWS -

On Satur­day, the gov­ern­ments in Bei­jing, Shang­hai, Guangzhou, and Shen­zhen re­leased draft rules on car-hail­ing ser­vices to so­licit pub­lic opin­ions.

Ac­cord­ing to the draft rules re­leased by the four first-tier cities, most ve­hi­cles en­dorsed by the ride-shar­ing plat­forms such as Didi-Uber will no longer qual­ify to serve pas­sen­gers, as the four cities all re­quire driv­ers to have a local house­hold reg­is­tra­tion, orhukou, and ve­hi­cles above a cer­tain en­gine dis­place­ment if they are pro­vid­ing rides to pas­sen­gers. Didi has ar­gued that num­ber of avail­able cars would drop sig­nif­i­cantly should the rules come into ef­fect and the cost of its ser­vices may dou­ble.

There has al­ready been a cho­rus of com­plaints about the hike in fares fol­low­ing the merger be­tween Didi Chux­ing and Uber China in Au­gust. The top two ride-hail­ing ser­vice providers in China, which are in­te­grat­ing their man­age­rial and tech­no­log­i­cal ex­pe­ri­ence and ex­per­tise while main­tain­ing in­de­pen­dent brand­ing and business op­er­a­tions, have slashed their sub­si­dies for pas­sen­gers and raised their charges dur­ing rush hours, par­tic­u­larly in Bei­jing and Shen­zhen.

The fare hikes by Didi and Uber, how­ever, are not just a re­sult of their merger. The two com­pa­nies have been spend­ing bil­lions of dol­lars sub­si­diz­ing their driv­ers and pas­sen­gers as they ri­valed each other for dom­i­nance in the mar­ket, and both were los­ing money hand over fist.

In fact, all the ride-hail­ing com­pa­nies have adopted the strat­egy of spend­ing heav­ily on en­ter­ing the mar­ket in a bid to gain a sig­nif­i­cant share of what they be­lieve will be a gold mine. In par­tic­u­lar, they have of­fered high in­cen­tives to at­tract more driv­ers, even though there was a risk they would be pun­ished for il­le­gally en­gag­ing in the ride-shar­ing business. The car-hail­ing ser­vices will be for­mally le­gal­ized onNov 1.

That, to a point, ex­plains why Didi of­fered to “re­im­burse” the penal­ties its driv­ers re­ceived be­fore the car-hail­ing ser­vices are le­gal­ized, even though this means it has been en­dors­ing an il­le­gal ac­tiv­ity.

To com­pete with the new­be­he­moth, other ride-shar­ing com­pa­nies such as Yi­dao Yongche and Shen­zhou Zhuanche are con­tin­u­ing to pro­vide sub­si­dies to driv­ers and pas­sen­gers, adding more un­cer­tain­ties to the com­pe­ti­tion. Yi­dao has re­launched its “top-up” com­pen­sa­tion, which grants pas­sen­gers a bonus of the same amount of cred­its as they top up, while Shen­zhou has promised not to take a share of its driv­ers’ earn­ings.

Yet many fear the merger be­tween the two largest com­pa­nies Didi and Uber will cre­ate a mo­nop­oly that will con­tin­u­ally push up fares. TheMin­istry of Com­merce has said it is in­ves­ti­gat­ing whether the merger would cre­ate a mo­nop­oly as to­gether Didi and Uber ac­count for more than 90 per­cent of the mar­ket.

How­ever, the truth is, the emerg­ing mar­ket is pyra­mid­shaped, mean­ing bet­ter ser­vices are of­fered to those who pay more. The new­na­tional reg­u­la­tion on the ride-hail­ing in­dus­try has en­dorsed this “dif­fer­en­ti­ated op­er­a­tion”, which means the costs for a ride via Didi or Uber China will vary ac­cord­ing to peo­ple’s de­mands. In­metropolises such as Bei­jing and Shang­hai, the pro­vi­sion of pub­lic trans­port lags be­hind de­mand, and pri­vate cap­i­tal and in­ter­net­based tech­nolo­gies are com­ing to­gether to meet peo­ple’s needs. In­stead of reg­u­lat­ing the in­dus­try so it is es­sen­tially man­aged like the tra­di­tional taxi in­dus­try, local gov­ern­ments should wel­come the ap­proach of In­ter­net Plus trans­porta­tion, be­cause it not only cre­ates em­ploy­ment, but is also prompt­ing changes to the tra­di­tional taxi in­dus­try and col­lect­ing data, such as when and where pas­sen­gers re­quire a ride, for the ur­ban man­age­ment au­thor­i­ties, so they can im­prove pub­lic trans­port to meet peo­ple’s needs in the long run.

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