Beijing taxi sector remains deadlocked

(Ecns.cn) -- Complaints over the capital's taxi sector have festered among cab drivers and passengers in recent years, yet taxi companies continue to reap substantial profits from monopoly practices, a situation that has brought Beijing's taxi industry to an impasse, according to the China Economic Weekly.

Passengers say that many cab drivers refuse to provide service during rush hours or on rainy days; the drivers argue that the costs of trips on such occasions are too high to be profitable.

The government has drafted numerous rules regulating the taxi sector to address the problem. But because of constant fuel price hikes and rising contract fees, some cabbies still turn a blind eye and refuse to take fares at certain times.

The only "winners" are the taxi companies, thanks to a system characterized by stringent market entry requirements and monopoly control. In China, taxi companies lease a car to one or two drivers on monthly contracts, and then collect high fees from the drivers every month. The drivers must also pay for maintenance of the cars.

Driver fury

On April 18, 2012, Xiao Yu and his colleagues waited for over 30 minutes on a rainy day outside Beijing's Guomao Subway Station, but every taxi refused to stop, reported the China Economic Weekly.

According to Xiao, some of the cars were not carrying fares and their signal lights indicated that they were in fact available, yet the drivers stepped on the gas when they saw crowds of people standing in the rain.

Mr. Gu, a veteran cab driver, said he was one of the drivers who passed the subway station that day. It was around seven o'clock in the evening and time to hand the car over to the next shift, so he would not stop, Gu said.

Many cabbies don't go out on rainy days because heavy traffic congestion or an unexpected engine stall will mean big losses, he added.

In Beijing, taxi drivers are under great financial pressure because they must first take monthly contract fees into consideration. According to Gu, he has to pay his employer 8,280 yuan (US$1,312) a month because the car operates on double shifts, while a cabbie whose car works on single shift system has to pay 5,157 yuan (US$817).

After adding in the costs of fuel, maintenance and possible traffic violations, the monthly expenses are even higher. Gu said he must first earn 300 yuan a day just to cover those expenses; only after that are the earnings his own.

As a result, most cab drivers complain that the job does not pay fairly, and prefer to take breaks rather than drive while losing money. Many of them have long been frustrated about unreasonable contract fees, but the problem has yet to be resolved.

Monopoly by companies

Beijing Yinjian Taxi Company is the biggest taxi company in the capital, and owns about 18 percent of all Beijing cabs. At the company's base in the southwestern district of Fengtai, a slogan reads "we make diligent workers wealthier."

Mr. Lin, a driver at the company, said he is often sickened by the sign. Of his earnings, he is only able to keep enough to make ends meet, while the company collects far more than his own salary.

According to Lin, a small taxi company that owns 300 cars can collect more than two million yuan (US$317,000) from contract fees alone, a figure that is much larger for companies with thousands of cabs.

Zhang Guoqing, a former official from the Beijing Beiqi Taxi Group and Shouqi Taxi Company, pointed out that taxi companies bear few market risks and do not carry the burden caused by rising fuel prices, maintenance and car accidents. Nevertheless, their monopoly of the taxi sector has led to the rampant abuse of drivers' rights, especially unreasonable contract fees and charges.

According to Zhang, the net profit from one taxi is about 3,000 yuan (US$476) every month for a company, and a branch with 300 cars only requires four staff members to manage.

Moreover, each cab is required to receive maintenance every month. At Beijing Yinjian's base in Fengtai, there is a self-run maintenance hall where all cab drivers must take their cars every month, revealed Lin.

Cab drivers cannot refuse because the cars belong to the company and they must obey the company's rules, complained Lin, who told China Economic Weekly that the maintenance hall earns several million yuan a year.

A limited number of taxi licenses is the major cause of the current situation in the industry. And as the supply of taxis remains fixed and demand rises dramatically, more drivers are picking their passengers more carefully.

According to People's Daily Online, the ten biggest taxi companies own 69.3 percent of all Beijing cabs, a reflection of a serious monopoly.

Call for a fair market

Although many scholars and industry watchers admit that the limitation of approval for taxi licenses is the underlying cause of the monopoly, almost all of them agree it will be very difficult to break.

Currently there are 67,000 taxis in Beijing, but the last census revealed that the population of the city's permanent residents had hit 19.7 million. Obviously, the number of taxis is far from sufficient to meet demand, but the government cannot just loosen the rules, said Zhou Yi, manager of a taxi company branch in Beijing.

In fact, calls for reform of the taxi business have never ceased in the last decade, yet things have changed very little. The government has been unwilling to take a strong stand on the issue, and has instead focused on improving the cab drivers' conditions.

In March this year the transport and labor ministries, together with a major trade union, started a two-year campaign to improve labor relations within the taxi sector to better protect drivers' rights and reduce the chance of strikes.