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October 27, 2016

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Ride-hailing in a new lane: good or bad?

EDITOR’S note:

INTERNET Plus, a concept highlighted in the government work report delivered by Premier Li Keqiang at the annual session of the National People’s Congress in Beijing in March, is pushing the boundaries of China’s traditional industries. Nowadays, enterprises across the country are embracing changes by incorporating advancements in the Internet and related technologies into their business models. In a series by Shanghai Daily, we explore how this concept is reshaping our world.

THE latest government bid to regulate the contentious ride-hailing industry has left many Shanghai residents bewildered, if not downright irritated.

The new rules, which will come into effect on November 1, restrict ride-hailing drivers to those with Shanghai household residency permits and local license plates.

The rules can be seen as further measures Shanghai has introduced to take cars off its badly congested roads and move forward with its strategy to give high priority to public transport service for a mega city like Shanghai.

Data show the average speed on more than 12 percent of the city’s expressways is under 40 kilometers per hour during the morning rush hour, according to Shanghai Construction and Transportation Development Research Institute.

At the end of 2015 there were about 2.3 million cars with Shanghai plates. The figure will rise as the authority issues about 100,000 new plates every year.

Cars with non-local plates are banned from using expressways during the morning (7:30am-9:30am) and evening (4:30pm-6:30pm) peak periods.

At other times, about 33 percent of the traffic on the city’s expressways is from cars with non-local plates. Unavailable is the figure about how many cars with non-Shanghai plates there are in the city.

But critics argue that the regulations will force many drivers out of the service, sending fares higher. Consumers worry that this popular form of daily transport will be pinched by government heavy-handedness.

Shanghai resident Fiona Dong said she worries that booking rides through online hailing apps will be more difficult under the new rules.

“Although some vehicles with non-local car plates sometimes drive recklessly, ride hailing is still the most convenient way to get to town when arriving at the airport,” she said. “Otherwise, I have to wait more than half an hour to get a taxi and the fare will be a third more expensive.”

Ride-hailing platforms are part of the concept of the “sharing economy,” where people can by-pass mainstream, traditional services and link up, people-to-people, via mobile phone apps. The idea of sharing is meant to reduce costs and improve efficiency.

Controversy has arisen because mainstream cabbies complain that ride-hailing services are undercutting their incomes and aren’t subject to the same scrutiny. In addition, there have also been incidents of crimes such as rape related to ride-hailing, both in China and around the world.

In July, China’s Ministry of Transport, along with six other government bodies, instructed local authorities to draw up their own rules on criteria for drivers and vehicles on ride-hailing platforms.

That has led to a patchwork of regulation. In Shanghai, Beijing and Tianjin, for example, only drivers with local household registrations are eligible to pick up passengers from car-hailing applications. In other cities, like Hangzhou, out-of-town residents are permitted under certain conditions to pick up app bookings .

In addition to the status of drivers, the new rules also cover items such as vehicle emission standards and even the length of an eligible car’s wheelbase.

Didi said that of the 410,000 Shanghai drivers operating on its ride-hailing platform, less than 10,000 of them have local residency permits and a significant proportion of its vehicles don’t conform to the new size regulations.

The company wants regulators to ease up on some of the restrictions, but its call for reconsideration has yet to get a response.

Some critics of the new regulations share the view that government should be encouraging healthy market competition instead of setting up standards to squeeze out participants.

In a roundtable discussion hosted by National School of Development at Peking University earlier this month, economists and industry watchers said household residency requirements for drivers won’t serve the purpose of making ride-hailing more reliable. The rules will also deprive non-local drivers of an opportunity to earn a living in mega cities like Shanghai and Beijing.

Some argued that the new regulations breach the principle of a free market economy.

On a more practical level, it will be almost impossible for traffic authorities to check on the household registration of motorists let alone distinguish which private vehicles are linked to car-hailing platforms.

The new Shanghai regulations also clamp down on car-pooling apps. They require that vehicles picking up multiple riders must have local license plates and that each vehicle will be restricted to picking up only two car-pooling rides a day.

Car-pooling has developed as a means of reducing the numbers of cars on the roadways and of cutting transport costs for consumers by linking up people headed for the same destination.

Zhong Hongjun, an assistant professor at the business college of Shanghai University of Finance and Economics, said riders should be the ones to determine whom to share rides with, as long as those involved have the same route to the same final destination.

Fu Weigang of independent research at the Shanghai Institute of Finance and Law, said the government should be encouraging transport that increases efficiency, reduces costs and cuts the number of cars on the streets.

Shanghai traffic authorities have issued only a vague guideline on ride-sharing costs, saying that the costs should cover basic fuel charges. Fu suggested the introduction of specific price ceilings for each ride, for example, at half the cost of a taxi ride of the same length, in order to prevent profit-seekers from turning nonprofit ride-sharing into businesses.

Dida Pinche, which currently covers 339 domestic cities with 50 million users, said each vehicle on its platform is booked about 1.3 times on an average day. It normally costs passengers about two-thirds the price of a similar taxi ride.

“As long as drivers and riders agree, we should encourage ride-sharing,” said Dida Chief Executive Song Zhongjie. “It’s in both a company’s and a vehicle owner’s interest to increase usage and reduce traffic.”

Shao Dan, senior engineer and director of policy research office at the Shanghai City Comprehensive Transportation Planning Institute, acknowledged that the new rules are aimed a preventing informal car-pooling into for-profit businesses.

“But, generally speaking, not-for-profit car pooling should be encouraged, which is in line with Shanghai’s public traffic blueprint to prioritize public transportation and to reduce the use of private passenger cars,” he added.


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