Cab shortage drives China's car-hire boom

Cab shortage drives China's car-hire boom

For his daily trip to work, research executive Luo Zhiyuan switches on the car-hire app on his phone, makes a request, then goes downstairs to wait for a ride, which usually arrives immediately.

Before these apps came along, he often had to wait at least 15 minutes if he called a taxi hotline. "And hailing one on the street can be impossible during rush hour," said Mr Luo, 34, who lives in Shanghai. "Life's much easier now."

The convenience provided by Chinese taxi- and car-hire apps has driven an industry boom in the past year, with an estimated 150 million Chinese using these apps. A February merger between the two market leaders Didi Dache and Kuaidi Dache - which make up more than 90 per cent of market share - was recently valued at US$8.75 billion (S$11.8 billion).

But just as with other countries, questions of regulation have begun emerging in this nascent sector. Singapore only this month introduced a Bill that would allow the Land Transport Authority to manage third-party cab booking apps.

In China, the main debate has been over the use of car-hire, or zhuan che, services, which Didi and Kuaidi provide, through tie-ups with car rental firms. In what the local press has dubbed a test case, Jinan-based driver Chen Chao - who is registered with Didi - went to court last Wednesday to appeal against a 20,000 yuan (S$4,340) fine. Like many other car-hire drivers, Chen is nominally registered with a rental company, but uses his own car to ferry passengers around.

This is illegal, the Chinese authorities say, because personal cars cannot be used for hire. Mr Chen, besides appealing against the technicalities of his arrest, also questioned why Didi was not fined. His case is still pending.

Experts told The Straits Times that the authorities are in a bind because car-hire apps, being a new innovation, fall into a grey area current laws do not fully address. "The market always moves faster than the law," said Southeast University associate law professor Gu Dasong.

What's more, the services have been popular because they address a significant shortfall. "Zhuan che services have mushroomed because taxi services in China have not kept up with customer expectations," said Mr Xu Kangming, who runs a Shanghai-based transport consultancy.

Beijing, for instance, has not added to its 66,000 taxis since 2003, although the population has grown by about 50 per cent to 20 million in the past decade.

While there are no official zhuan che figures, reports estimated that thousands more cars are now available for commuters in major cities, with rental companies expanding their fleet through personal cars to meet demand. Zhuan che supporters call it a fairer, more organised version of the shady "black taxis", or hei che, which charge arbitrary fares that are often a few times higher than taxis charge.

And while zhuan che services are more expensive than taxis, they come with perks, such as free bottled water and phone charging services.

But those against zhuan che services question the lack of oversight for car-hire drivers, and worry about quality control if more people enter the industry. According to Chinese media reports, some drivers can get registered with a rental company after only one day of training.

Beijing taxi driver Lei Yiguang lamented that this was unfair to cabbies, who had to go through a series of tests to get their licences.

"The authorities are not clamping down on this only because there has been no major incident involving a customer so far," he said. Car-hire apps have run into more serious trouble in other countries, such as India, where a woman alleged last December that an Uber driver had raped her.

The authorities, however, are increasing their checks, according to zhuan che drivers, particularly after Transport Minister Yang Chuantang stated last month that the government "will never allow" personal cars to be used as taxis.

One driver, who wanted to be known only as Mr Cheng, said officials are frequently checking cars that pick up or drop off people at airports and train stations. His takings of about 500 yuan a day, however, are about 30 per cent above his previous office job, which is why he is staying put.

While it is uncertain how the authorities will proceed, Prof Gu feels that they should give the industry "some space and let the marketplace decide".

Beijing-based Singaporean Isabel Kwek, who uses the zhuan che services every day, is one commuter who hopes the industry will be allowed to develop. "It's a vast improvement from the past," said Ms Kwek, 44, who works in marketing communications, adding that she would be disappointed if the service were to be stopped.

This article was first published on April 25, 2015.
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