China Cracks Down On Ride-Hailing Services

In the midst of an ever-widening battle between Uber and its car-hailing competitors in China, with billions of dollars of annual spending, the country is tightening its scrutiny of the industry, with the potential to hobble growth, The Wall Street Journal reported Monday (Oct. 12).

A slowdown in growth would come if Chinese overseers mandate rules that would regulate the industry to adopt higher costs and stricter standards, WSJ reported.

A measure that has been pushed by regulators would curtail drivers from working for more than one ride-hailing operator concurrently. WSJ reported that any boost in regulations could push advantages, competitively speaking, to a favored Chinese company. The Ministry of Transport has also drafted rules that would mandate that online car apps in China must share data with overseers, register their fleets as taxi services and insure vehicles.

For foreign companies, licenses must be in place tied to telecommunications operations, and security checks must also be carried out.

The proposed rules will be opened up for public comment within the next month, WSJ noted, which stated that such rulemaking offers up “a path for legalization in China” for Uber and for peer/rival Didi Kuaidi. Those two companies are looking to latch onto transportation demand from a growing Chinese middle class. The private taxi industry has largely been an illegal one, and China’s state news agency reported over the summer that more than 1,300 drivers across both companies were caught by authorities in Beijing allegedly running illegal taxi services and evading taxes.

In terms of the billions of dollars at stake: Didi has raised about $3 billion, while Uber has pledged to spend as much as $1 billion in that market.

Didi has been granted an online booking license in Shanghai, which the company termed as the first of its kind. Estimates have pegged Didi’s market share at 80 percent in China.

Other rules proposed by the Ministry would stipulate that all drivers across the private industry must have at least three years of driving experience and can have no more than seven seats in a vehicle.

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