China bans private cars from offering services via taxi apps
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China has implemented a nationwide ban on drivers of private cars offering services via car-hailing apps, the latest potential blow to companies such as Uber and local rivals that are attempting to disrupt the country’s heavily regulated taxi industry.
The ruling by China’s ministry of transport bans private cars from offering unlicensed taxi services via mobile-phone apps and follows a similar crackdown by municipal authorities in Beijing this week. But it appears to exclude premium services, which do not compete with state-regulated taxis whose fares are capped at below-market rates.
A ministry spokesman said in comments on its website that it “urges an end to illegal operations that may hurt consumer interests and fair competition”. However it appeared to leave open the possibility for companies to offer rides with rented cars, which is how many now get around a ban on unlicensed private taxis. In very nuanced comments the ministry even endorsed car hailing apps as having a “positive role”, and said it “encouraged innovation”
“Banning private cars from using the apps will put passengers at ease,” the ministry said. “But apps for premium car services have an innovative service model and play a positive role in meeting the high-end and differentiated transportation market”.
The comments suggest the government is seeking a middle ground in the amount of “disruption” of China’s traditional economy that it will tolerate, as internet companies move aggressively into many state-regulated sectors, including transport and financial services.
“There is a lot of ambiguity and grey area on the regulations side,” said Cynthia Meng, head China technology analyst at Jefferies Hong Kong. “It will take months or even a year to get clarity on this.”
The transport ministry did not specify any service providers it was targeting, but four companies offer premium private car booking services in China.
The transport ministry’s decision follows a statement on Wednesday by Beijing traffic authorities that it would levy fines of up to Rmb20,000 ($3,221) on drivers operating unlicensed taxis. That step seemed aimed at Uber, which launched last year and now operates in nine Chinese cities.
Uber has said in a statement that the “business is running as usual”.
In addition to a premium car service, Uber operates “People’s Uber” — priced to directly compete with state-licensed taxis whose fares are capped.
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