Uber taxi service faces uphill battle in China

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TAXI-BOOKING SERVICE Uber has faced legal challenges and fierce competition with domestic companies in China since its soft-landing in Shanghai in late 2013.

According to a statement made last Wednesday, Uber’s major competitor DiDi Kuaidi - the result of a merger last February between China’s two largest taxi-booking companies - has allegedly raised more than US$2bn in new funding, exceeding its original net goal of US$1.5bn. The domestic taxi-booking company is backed by internet notables Alibaba and Tencent, while Uber is backed by China search engine Baidu and plans to receive funding of around US$1bn.

DiDi KuaiDi taxi-booking app

Uber has locked horns with Didi KuaiDi in China backed by domestic internet heavyweights Alibaba and Tencent (owner of WeChat)

Despite increases in its competitor’s funding and several government raids within the past year, San Francisco-based Uber continues to hold firm in the Chinese market. CEO Travis Kalanick is optimistic, stating earlier this year that the company is looking to expand its services to over 50 cities in China, all with populations of 5 million people or more. Currently, Uber operates in about 10 major Chinese cities and has witnessed changes in the way many people in China use transportation.

Kalanick stated in a conference held in Guizhou in May that when the cost of using Uber is lower than owning a car, habits in commuting and transportation will change as people will no longer need to buy their own vehicles. Kalanick went on to state that Uber’s service will help improve the efficiency of public transportation and traffic in cities, citing a 10,000 car decrease in Shanghai since Uber’s arrival to the city in 2013.

Critics of Uber’s move into the Chinese market conclude that the company is too little too late: in addition to DiDi KuaiDi’s recent funding, the market has already long been saturated by domestic companies and the current state-run taxi system. DiDi Dache - one of the two taxi-calling companies that merged to become DiDi KuaiDi - was founded in June 2012 and already boasted service in 178 major Chinese cities with approximately 100 million users and 900,000 registered taxi drivers before the merger.   Both DiDi and KuaiDi originally started as an accessory app helping riders hail state-owned taxis. Serious investment from Tencent and Alibaba allowed for promotions - including paying drivers and riders both to use the app - to test the start-up’s business strategy and gain recognition in the market.

Additionally, DiDi KuaiDi does offer more than Uber for drivers and customers alike. DiDi KuaDi lets users pay a premium for a faster connection and collaborates with local taxi companies, whereas Uber relies exclusively on private-car hires, creating greater tension between the US company and Chinese taxi drivers. Currently, both DiDi KuaiDi and Uber employ smartphone apps configured with GPS for booking cabs, allowing their users to pinpoint their current locations. Apps from both competing companies feature a rating system in which customers can rate their driver based on cleanliness of the cab and politeness, leading to better service among cab drivers.

Uber’s biggest critics are local cab drivers working under state-owned taxi companies. In January 2015, taxi drivers from across China went on strike in protest at steep cab rental fees, low wages and competition from private-hire companies such as Uber. The strikes hit several provincial capitals across China, causing an upset in the number of taxis seen on the road. According to state media, China’s Ministry of Transport responded to the strikes by banning private cars from providing rides through taxi apps such as Uber. In recent months, cab drivers in Shenyang, Jinan, and Nanjing have continued to demonstrate over declining demand for their services, arguing that the government needs to legislate and enforce laws that crack down on private cab services.

Last month, Beijing responded to concerns from local taxi drivers by creating its own taxi booking service, called ‘96106.’ Currently, the service is only limited to phone - an app is scheduled to come out soon - and has only received a 68% success rating. Without location pin-pointing software, Beijing’s 96106 lacks a major fundamental that DiDi Kuai Di and Uber have already mastered. Additionally, 96106 requires people to book several hours in advance, whereas with both taxi-hire apps, customers can book on the spot.

The legality of ride-sharing in China is still a grey area. State transport officials raided the Guangzhou office of Uber this April, citing the illegality of care-hire services affiliated with private drivers. Uber is no stranger to legal issues; since its conception, several critics have called into question safety concerns and tax evasion. According to a survey by BusinessInsider, Uber is currently banned in Germany, Thailand, and several cities in India and the United States. France is the latest European country to ban the service. Additionally, operations have been suspended in Spain and South Korea. In Beijing, authorities are fining private-hire cabs up to Rmb20,000 (US$3,333). Crackdowns in China happen sporadically but China’s Ministry of Transport has yet to determine clear-cut, nationwide regulations for taxi-booking apps.

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