China: new strategy seen as impairment to ride-hailing apps image

Online ride-booking services might receive a “deadly” punch in China, where authorities have decided through the use of a new plan draft to disallow the use of private cars.

This strategy will potentially deliver a serious setback to popular service providers such as Didi Kuaidi or US competitor Uber which have invested heavily in a bid to expand their business in the world’s most populous nation. The outlined standards have operators banned from the use of privately registered cars, as they would need to receive licenses from local authorities to perform their online ride-booking functions, while also being restricted to using only China-based servers and having to set up offices in the areas where the services are offered. The cars used by the ride-hailing operators would also need to be commercially registered and have GPS devices installed and enabled. The drivers would also have to undergo some qualification tests, reads the new draft that was made official recently by the transport ministry’s website.

The plan would go against the current business model of the services – they tap privately registered cars and they match them with persons seeking rides. Uber and Didi Kuaidi, backed by numerous investors because of their expansions plans in China, would further be impaired by the government granting further authority to local regulators to come up with the license quota or needing offices in more than one city. “If it takes effect, it’ll be a devastating blow to the industry,” comments hang Xu, a Beijing-based analyst at market-research firm Analysys International.

Via Bloomberg