China Gives Green Lights To Ridesharing Services

Finally, drivers for ridesharing platforms such as Didi and Uber in mainland China don’t need to be on tenterhooks anymore. The Chinese government has given the green light to online ride-hailing services.

Finally, drivers for ridesharing platforms such as Didi and Uber in mainland China don’t need to be on tenterhooks anymore. The Chinese government has given the green light to online ride-hailing services.

On the afternoon of July, 28th, 2016, China’s Ministry of Transport held a press conference and officially issued State Council Information Office’s Recommendations on Deepening Reform and Promoting Orderly Development of the Taxi Industry (hereafter referred to as “State Council’s Recommendations”) as well as Provisional Measures on the Administration of Online Ridesharing Services (hereafter referred to as “Provisional measures”).

According to “Provisional Measures”, online ridesharing services are allowed to operate as long as they have received the Certificate of Online Ridesharing Service and registered at local departments of communications for internet information service. In other words, the Chinese government has recognized the legal status of online ridesharing platforms and cars for these platforms, and is ready to include online ridesharing service as part of the passenger transport system.

The “Provisional Measures” also stipulate that cars on online ridesharing platforms should be registered and have received the Transport Certificate for Online Ridesharing Service, while drivers should also get the License for Online Ridesharing Service.

In addition, the “Provisional Measures” stipulate that cars used for rides must not be more than eight years old or have more than 600,000 km on the odometer.

The following are some of the major points in the “Provisional Measures”:

1. Platform’s qualification. Government loosens the requirements to online ridesharing platforms and allow platforms to run with light asset and own no vehicles;
2. Register procedures. Provincial governments are entitled power to tell if an online ridesharing platform is qualified enough to provide service, and once the platform is registered in provincial government, it can operate nationally;
3. Basic requirements for vehicles. Vehicles must be passenger cars with no more than seven seats, and be equipped with appropriate GPS device as well as emergency alarming device. The technical performance of the vehicle must meet relevant standards for safe driving;
4. Basic requirements for drivers. The admission standard for drivers should be very strict. Drivers should have no record of car accidents, reckless driving, drunk driving, drug use and criminal behavior;
5. Application standards for drivers and vehicles. Online ridesharing platforms are given the freedom to set their own standards for applicants;
6. Inappropriate vehicles. Cars must be retired from service after upon reaching 600,000 km or when they are over eight years old;
7. Labor contract. Online ridesharing platforms can sign various kinds of contracts with drivers based on the work time, frequency of specific drivers;
8. Price strategy. Market has the dominant role in the price of online ridesharing service, but the government reserves the right to properly guide or manage the price;
9. The rules will be implemented on Nov. 1, 2016.

Generally speaking, the new regulations appear less onerous than people has expected. However, it is worth mentioning that drivers still have to get the Transport Certificate for Online Ridesharing Service as well as the License for Online Ridesharing Service in order to provide service, which still raises the entrance requirement for drivers. In the near future, all the online ridesharing platforms might focus much of their attention on this aspect.

In addition, the time when online ridesharing platforms competed to give subsidies to passengers might never come back. According to the “Provisional Measures”, online ridesharing platforms should not engage in behaviors such as eliminating competition, and compete with each other by giving too much subsidy to passengers and offering ride services at prices much lower than the market average. It is known to all that money-burning subsidy strategy is a popular tactic previously employed by both Uber and Didi for grabbing greater market share.

There are also some good news for Chinese taxi drivers. State Council‘s Recommendations” call for gradually phasing out taxi franchising fees, encouraging China’s taxi industry to transition toward offering online provision of car services, standardizing development of online car booking, and encouraging ride sharing by private individuals with passenger cars.

In addition, the government will now encourage private auto-sharing (including car-pooling).

At present, major online ridesharing platforms seem to be welcome to the new regulations. As a matter of fact, many experts have predicted that the Chinese ridesharing industry had gone through the money-burning subsidy period. To keep users, they will have to focus more attention on providing better services.
In response to the new regulations, Didi Chuxing, currently the number one online ridesharing platform, stated that:

“There are not only over 10 million registered drivers, but also several million taxi drivers on Didi. Next, Didi will take concrete measures, invested 100 million RMB and better integrate development of taxis and cars hailed through online ridesharing platforms, promote the upgrading of traditional taxi industry, improve efficiency and taxi drivers’ income by working closely with government departments, taxi companies as well as taxi drivers. Ultimately, Didi aims to provide the best ridesharing service for the general public in China.”

In addition, since the new regulation entitles local governments rights to manage and govern ridesharing services, Didi called for local governments to take into consideration of interests and needs for convenience of the general public, when carrying out the new regulations, promote innovation, streamline administration and delegate power to the lower levels, so as to provide a favorable environment for the development of new industries.

Uber also responded to the new regulations quickly:

“We welcome newly published government guidelines on ride-sharing services and see the rules as an endorsement of the industry. The new rules also make China the first among major economies to pass national rules to regulate the industry.
Uber China is a localized mobile internet company run and invested by Chinese. The ultimate goal of Uber is always to bring convenience to the Chinese people. Uber China meet all the requirements for online ridesharing platforms stipulated in the new rules. In the future, we look forward to closely working with policymakers around the country to put these regulations into practice.”

Maybe, it’s time to stop money-burning competition and focus more attention on applying for relevant certificates and providing better service.


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[The article is published and edited with authorization from the author @Han Pei, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.

(Chinese Version)

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