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Will more regulation make for a better taxi industry?
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THERE have been a string of reform measures of late concerning China’s taxi industry.
On October 10, the Ministry of Transport issued an interim guideline on taxi-hailing mobile apps, for which it is now seeking public input. According to the guideline, private car owners will have to obtain a license if they want to provide taxi services. Those caught operating without a license will be fined up to 30,000 yuan (US$4,728).
In Shanghai, local variations of the national guideline have presented freelance cabbies using such apps as Uber and Didikuaiche with a way to legalize their business.
If they continue picking up passengers, they will be obliged to comply with age limits and driving-history standards. Other requirements must also be met, including the purchase of accident liability insurance, tax payment (depending on revenues) and, last but not least, the mandatory scraping of cars after eight years of service. On October 8, Didikuaidi became the first domestic taxi-hailing app to obtain a license from Shanghai traffic authorities to run private taxi services.
More efficient
Taxi-hailing apps offer a much more efficient way to catch a ride than curb-side cab hailing. Some of my friends moonlight as Uber drivers, others occasionally tell in WeChat posts of lucky experiences being ferried in an Audi A8 or BMW 750.
And becoming an Uber cabbie does seem to be financially promising. A friend, who lives in Hongkou District and works in Changning District, has developed a business out of picking up passengers on his way to and from work. He earns more than 2,000 yuan a month as an Uber driver. “More than enough to cover the gasoline costs twice over,” he told me recently.
Taxi-hailing apps are indeed a game changer in big cities like Shanghai. But ever since their inception they have been dogged by an “original sin,” in that they exempt freelance cabbies from income taxes and franchise fees. This is seen as unfair competition, providing a lightning rod for recurrent protests around the world by unionized taxi drivers.
The debate over the pros and cons of taxi-calling apps is polarized. Supporters cite better cars, service and comfort, while opponents — often taxi drivers — complain that private cabbies steal their business. Joining them are senior citizens without smartphones.
Given these complaints, the government is justified in its crackdown on the unbridled use of these apps.
But it must have also dawned on some officials that curbing the use of these apps doesn’t necessarily make taxi drivers better off. In fact, they have already set out to overhaul the sector, but from a different angle.
The most basic reform measures have come in the form of price hikes. Take Shanghai. Starting October 8, the flag-fall price for local taxis for the first three kilometers increased from 13 yuan to 14 yuan, and the fare rose to a rate of 2.5 yuan for every kilometer thereafter.
Some drivers are not impressed. During the National Day holiday, I asked a cabbie surnamed Zhang for his opinion on the price hike. His reply was as I expected: “It cannot be of much help, and may even hurt business.” For many of the approximately 94,000 professional, full-time cabbies currently employed by taxi companies in Shanghai, a far bigger concern is the exorbitant franchise fees they pay their employers. These fees average about 8,000 yuan a month per person.
Some taxi companies across the country have made attempts to waive or cut these fees to reduce the financial burden on drivers.
These are meaningful steps, but increasing the income of taxi drivers and reining in wayward apps are two separate policies that can and ought to go together. Looking at the bigger picture, the latter is even more imperative.
Restricting the use of apps is fine, but does it necessarily lead to a more — or better — regulated taxi industry? I doubt it. It is widely believed that even without these apps, the taxi market is in dire need of an overhaul. It so happened that technological advances came along at a time of growing public dismay at cabbies’ transgressions such as refusing short-distance travelers, making deliberate detours and ripping off passengers.
‘Cheese’ moving
In a word, taxi-hailing apps have shaken up the monopoly of taxi companies and — to draw from the title of a popular business book — moved their “cheese.”
But that very “cheese” is in danger of becoming rancid. A decade ago, Shanghai’s taxis were considered one of the city’s most glamorous hallmarks thanks to their quality service and reasonable rates. Nowadays, however, the city’s explosive population growth has overwhelmed the capacity of its 50,000-strong cab fleet.
As the cliche goes: “What is rational is actual and what is actual is rational.” Tainted as they are by controversy and criticism, taxi-hailing apps were born of a real market need. Like it or not, banning them today will only result in the creation of many substitutes tomorrow.
What the government should do is to let the market run its course in areas where real demand can play a better role in allocating resources — a goal often proclaimed in official statements. Hopefully, a healthy dose of competition from mobile app-empowered private cabbies will jolt established taxi companies out of complacency and inject new dynamics into the market.
In this case, the government’s ideal role should be that of an arbiter, acting to ensure that the breaking of the taxi monopoly proceeds in a fair and legal manner.
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