Draft rules to put ride-hailing apps on the skids, analysts say

Ride-hailing services Didi Chuxing and Uber

Four megacities have drawn up draft regulations on the drivers and private vehicles used for online ride-hailing services, a move analysts have said could deal a major blow to a booming industry.

The proposed rules released by Beijing and Shanghai include requirements that both drivers and cars are registered locally, while Shenzhen and Guangzhou in Guangdong province plan to ban the use of certain vehicles.

Beijing's transport commission said the rules released on Saturday, aim to tackle the "disease" of rapid growth in population and vehicles, which affect the environment.

Industry experts argue that such rules could dampen enthusiasm for ride-hailing apps such as Didi Chuxing and Uber, which allow private car owners to earn money by providing taxi services.

Zhang Xu, a transport analyst for internet consultancy Analysys, said the move would have a "catastrophic" impact on the industry in these cities, as it would limit the number of cars and drivers who can be used by the platforms.

In a statement on Saturday, Didi explained the difficulty it faces in meeting the proposed measures: "Take Shanghai, for example. Less than 10,000 of our 410,000 drivers in Shanghai have local hukou," which is the national system of housing registration.

In addition, just one-fifth of the vehicles in operation in Shanghai on the Didi app would meet the requirements in the draft rules, the company said, adding thatride-hailing services would become more expensive and less efficient due to limited supply.

Wang Xiaofeng, an analyst at global consultancy Forrester, said migrants from other parts of China in private-owned cars without local license plates provide a major part of the ride-hailing services in Beijing and Shanghai.

"Since the Didi-Uber merger in August, subsidies offered to drivers have been cut," Wang said. "Most local drivers are reluctant to offer services because its low-profit. So the gap is left for migrants with low-end cars to fill."

Wang said ride-hailing service providers are likely to place more emphasis on higher-profit chauffeur services, with cars provided by professional rental companies.

"But from the passengers' side, the tighter controls are good as they ensure they will have a safe ride," she added.

The draft rules come just months after lawmakers gave the green light for ride-hailing apps to operate in China.