Beijing legalized online car hailing apps such as Uber China and its homegrown rival Didi Chuxing nationwide. The move prompted Uber to praise China as “forward-thinking when it comes to business innovation.”
But upon closer inspection of last week’s guidance—effective Nov. 1—shows that China’s decision is more advantageous to the state than to enterprising businesses in the car hailing industry. Many stipulations are open-ended and at least one rule could severely hamper Uber China’s expansion strategy.
Car hailing has experienced fast growth in China, where a large part of the young population use smartphones on a daily basis. The Beijing-based Didi, which counts Apple Inc. as ones of its investors, said it manages more than 10 million rides a day.
Uber China, Didi, and smaller competitor Yidao Yongche have previously resided in a legal gray area. In some cities, protests by existing taxi drivers flared and car share drivers faced arrest and car impounding. In others, they were left alone and ridesharing became the primary transportation alternative.
The newly announced rules have yet to be adopted by regional and local jurisdictions, but they nevertheless move the industry into national legitimacy and legality, and offer a framework in which the businesses can operate.
Basic Framework
Guidance issued by Beijing requires online car hailing services to maintain cars that cannot have more than seven seats and must not exceed 600,000 km (372,000 miles) on the odometer. In addition, licensed drivers must have three years of minimum driving experience and no criminal record.
The regulations also give Beijing more oversight on deployment of ridesharing apps and control over their expansion. The Ministry of Transport also announced that local traffic regulations and fees would be determined with input from local authorities.
