Strikes and apps bring congestion on taxi market

A strike by cab drivers in the eastern Chinese city of Nanjing stretched into a second day on Friday, bringing the taxi management system into the spotlight again.

Five days before, a cab strike in the northeastern city of Shenyang brought services to a standstill in many areas.

The state taxi management system is characterized by stringent market entry requirements and a cartel of taxi companies. For commercial operations, a taxi needs to have a license (plate), which is different from a private car. Big taxi companies own thousands of taxi licenses, which can be traded on the market.

Following a fast growth in the late 1980s and early 1990s, the number of taxi companies in Beijing rose to 1,400 and the number of taxis to 60,000 in 1994. In response, the government decided to suspend the approval of new taxi companies and ban individual operations from that year. As a result, taxi companies began to monopolize the industry because of the fixed number of licenses available. Of Beijing's 200 companies which are currently operational, the ten biggest take about 70 percent of the market.

Beijing has almost the same number of taxis now as it did twenty years ago; 66,000. In that time the population has doubled and the same can be said for many other cities. Of those 66,000, only 1,157 are operated by private individuals, mostly on licenses granted before 1994.

Most taxi drivers have to rent cars from the ten big players. Wang Guifeng, 52, has been driving a taxi since 1998. He has to pay for fuel and repairs as well as a monthly rent of 7,000 yuan (1,142 U.S. dollars) to the Beijing Shengdali Company. The company owns 100 taxis and has five administrative staff.

"Apart from collecting the rent every 15th day, the company does not care about us at all," said Wang, who earns an average of 5,000 yuan every month, a little less than the Beijing average. Back in 1998, he made more than 3,000 yuan a month, more than double the average at that time and enough for his family to live a comfortable life in the capital.

The situation has led to widespread abuse of drivers' rights, with taxi companies charging exorbitant fees. The price for a taxi license in Shenyang has been driven up to 800,000 yuan in the past 20 years, said Li Feng, a taxi driver. "A license owner can easily earn more than 100,000 yuan a year by renting it," said Li.

These fees have slashed the incomes of taxi drivers, forcing them to work more than 12 hours a day, to the severe detriment of their health and the safety of passengers.

Nationwide, 2.6 million taxi drivers lead lives as tough as their Beijing counterparts. The shortage of jobs and financial hardship have forced them into an industry of harsh conditions and low incomes.

Despite increasing complaints about the situation, few have challenged the status quo.

"I do not bother to complain to my manager any more," said Wang. "If you want to quit, nobody will ask you to stay," he added.

APP COMPETITION, GOVERNMENT BACKLASH

The booming car-hailing apps are heaping more pressure on drivers.

Kuaidi Dache and Didi Dache, backed by Alibaba and Tencent respectively, account for almost 99 percent of the market with 154 million registered users in more than 300 cities.

The U.S. app network Uber's entry into the Chinese market in 2013 was low profile and it currently operates in only nine cities.

Kuaidi and Didi not only provide normal cab-hailing services connecting passengers with professional taxi drivers, but also provide luxury car pick-ups, which cost at least twice the normal cab fare.

Limousine services similar to Uber are popular while people take advantage of discount coupons from Kuaidi and Didi. Uber currently offers first time users a 50-yuan coupon.

A short ride in a new black VW Passat with free mineral water and tissues in Nanning, capital of south China's Guangxi Zhuang Autonomous Region, cost a Xinhua reporter 40 yuan, while a normal taxi ride costs 17 yuan. With a 15-yuan coupon from Didi, the reporter actually paid 25 yuan.

These services pose a looming threat to drivers like Wang and have lured many drivers to change their jobs and enjoy a much higher share of the profits.

"I only have to pay 20 percent of the fare to Didi and I can keep the remaining 80 percent, which is unheard of for taxi drivers," said Yang, the Passat driver.

Luxury car pick-up services--zhuanche in Chinese--are not uncontroversial. Under Chinese law, private car owners cannot take passengers for profit. Taxi-hailing apps claim that they cooperate with car-rental firms to avoid regulatory problems, but it's hard to exclude private car owners, who can easily register with a rental company.

Poorly qualified drivers, illegal operations and passenger safety are major problems facing a government resolute in prohibiting private cars from taking passengers for profit.

The Ministry of Transport issued a statement on Thursday, ordering app developers to exclude private cars from their platforms and ensure that all vehicles are owned by taxi or car-hire companies, out of concern, they say, for passenger safety.

In December, Shanghai detained 12 drivers using Didi Dache and fined each of them 10,000 yuan. Beijing authorities have also started to get tough with unlicensed drivers.

Action against unlicensed drivers has ruffled a few feathers as the vested interests--taxi companies-- remain untouched.

"It's not wise to crack down on zhuanche services indiscriminately," said Cheng Shidong, a researcher with the integrated transportation institute of the National Development and Reform Commission.

Not only does the high-end car-hailing supply fall short of demand, the basic traveling needs of Chinese people are not being met, said Cheng, adding that the government should be more welcoming to Internet innovation.

"The mobile Internet has brought big changes to the urban transportation set up. This could be a lever to force the irrational taxi management system to change," said Gu Dasong of Southeast University law school.