Car-hailing services in for a bumpy ride

A customer checks his smartphone app that eases finding a taxi. [Photo/China Daily]

The Ministry of Transport released draft rules on the management of online car-hailing services on Saturday. These are intended to properly regulate the booming sector, but are set to cast a shadow over the existing operations of major players such as the Chinese company Didi Kuaidi and its US rival Uber Technologies.

The rules require that the providers of car-hailing services insure the cars and passengers, and have labor contracts with the drivers; car-pooling and ride-sharing services offered by private drivers without a taxi license will be illegal.

In other words, private car-owners must register their vehicles as commercial taxis, which means their cars will be written off in eight years, regardless of their actual condition, if they become car-hailing service providers. And the rules will hinder many private car owners from participating in the business given the requirement to acquire a costly license.

The ministry is now soliciting public opinions on the draft rules. If they are finalized after a month of feedback, car-hailing companies will be able to operate legally in the world’s largest consumer market.

The brief history of car-hailing services in China shows that they have appealed to the public, who have benefited from more convenient services, and the participating private car owners, who have earned extra money. The Internet-based business model has also improved the distribution of social resources, and thus is in line with the country’s “Internet Plus” strategy and its drive to establish a “shared economy”.

However, for traditional taxi drivers and their companies, the newly emerging services are interlopers gobbling up their income.

Since the rise of the Internet-based car-hailing companies, there have been increasing complaints from traditional taxi drivers about the money they are losing due to the competition from the new service. Some of them have resorted to extremist measures in some cities, such as blocking the roads during rush hours in protest.

On the other hand, the traditional taxi industry has long been a sector that is lack of sufficient competition. And many taxi drivers complain that a large proportion of their incomes goes to pay the fees charged them by the taxi companies.

The rise of the Internet companies has rightly served as an alarm call to both traditional taxi operators and the industry regulators. It is obvious that the sector needs to be reformed so that more competition can be introduced to improve services. Yet it is never an easy task striking a balance between the old and the new in any sector.

The regulators should open up the industry more as competition will force the traditional taxi operators to improve their efficiency, provide better services and raise the incomes of taxi drivers. It will be a multi-win solution that benefits consumers, taxi drivers and the whole industry.

And society benefits from the taxes collected from the car-hailing companies and because the business model means otherwise idle vehicle resources are utilized.

The taxi companies, which may have to lower the fees they charge their drivers, would suffer some loss, but such a cost is socially worthwhile.

And, in their case, better a little than none. Although the rules have incurred criticism from the public, the ministry has at least taken a step toward ending the legal grey areas surrounding such services. In this sense, the controversial rules are probably better than no rules.

The new car-hailing services suit the way people live and have environmental benefits that should not be ignored. The regulators should listen to the feedback they get and regulate the car-hailing services in a way that achieves the best possible compromise between the old and the new.

The author is a senior writer with China Daily

xinzhiming@chinadaily.com.cn