The Hindu Business Line
The way ahead
As is typical in such situations, there is a race for scale. That race is driving global consolidation of service providers. Didi-Chuxing, the “Uber of China,” is funded by Tencent, Alibaba and Apple, and has the deep pockets to take the fight to Uber. They have effectively formed an alliance involving financial stakes in Lyft in the US, Ola in India and Grab in Southeast Asia. In China, Uber had been engaged in a bruising battle with Didi for market share. This was perversely and abruptly halted when motivated shareholders of both organisations brokered a peace that has left Uber with a minority stake in Didi and allowed Didi to take over Uber’s share of that market. Didi’s China operations are now three times as large as their competitors combined. Many fear that the viability of these organisations will depend on their acquiring such near-monopolistic scale.
With such concentration of market power in providing services, one may assume that their unprofitable operations will soon be rendered profitable. Fares that were too good to be true will evaporate. Both consumers and drivers may face an aggregator/employer wielding enormous leverage. Such an outcome should be of significant concern to communities and regulators, given the trend to blur the divide between for-profit private modes and usually subsidised public modes. “staggeringly unprofitable”.
We argue that communities and their governments can and should participate in orchestrating a positive trajectory for this mobility sector that leverages technology and business innovations while carefully protecting longer-term societal interests.
Elements of a roadmap
This orchestration will need to embody some fundamental principles:
Promote open, fair and vibrant competition: The disruptors have laid bare the calcified inefficiencies that the existing regulatory regimes had encouraged. Threatened by disruption, many legacy taxi operators are now finding new apps and tools to improve the efficiency of their game. Competition can boost everybody’s game to the benefit of all. Cleverly, perhaps, the disruptors often ignored all existing rules, acted as though they were not really taxi companies, and subverted the intent of all regulations, both the old and inefficient as well as the productive and well-intentioned. If the old regulatory emperor had no clothes, what should the new regulatory regime wear? Should they maintain some form of uniform rules governing unpredictable surge prices, acceptable wage rates and driver benefits to level the currently non-level playing field and promote meaningful competition? And, how should regulators realign mandatory vehicle standards? Should regulations require low-emission vehicles, easy access for passengers with disabilities, Sumantran, Fine and Gonsalvez are co-authors of a forthcoming book on future mobility