Didi Dache's car service called illegal

Experts calm about Shanghai official's remark, tightened regulatory environment

The impact of local government reactions to Didi Zhuanche, a car-hire service offered by taxi-hailing app Didi Dache, should not be overstated, industry insiders said on Thursday.

Discussions began to surface following a Shanghai Morning Post newspaper report on Thursday, which said a Shanghai official has referred to Didi Zhuanche as an "illegal business."

"If Didi Zhuanche includes cars without commercial operation licenses in its fleet, via Internet technology, we will prohibit it and crack down on it," a staff member with the Shanghai Municipal Transportation Commission, who declined to be named, confirmed to the Global Times Thursday.

Didi Dache did not answer calls from the Global Times asking for comments on Thursday.

The news fueled fears that more regulatory measures will be taken against car--hiring services offered by taxi-hailing apps by other Chinese cities in the future.

After US car-hire firm Uber Technologies Inc entered the Chinese market on July 14, leading taxi-hailing players in China, Kuaidi Dache and Didi Dache, rolled off their respective proprietary limo services in July and August to tap the potential of -China's private transportation market.

Didi Dache's car-hire service is called Didi Zhuanche, and Kuaidi Dache's service Kuaidi ONE. The two companies are backed by Internet giants Tencent Holdings and Alibaba Group Holding respectively.

Didi Zhuanche is included in the Didi Dache app as an alternative to the regular taxi-hailing service.

The Shanghai official's comment follows a series of problems encountered by Uber, the competitor of Didi Dache and Kuaidi Dache, recently.

Uber, which currently operates in nine Chinese cities, has been under fire in many countries and regions, including South Korea and Spain, amid concerns over user privacy and calls to tighten screening after a driver in India raped a customer.

In Southwest China's Chongqing, local police discovered that a private car driver with a criminal record had passed Uber's screening and attended a training session, the Guangzhou-based 21st Century Business Herald newspaper reported on Sunday.

Chongqing said it would fine unlicensed drivers operating via car-hailing services 30,000 yuan ($4,837.93) to 100,000 yuan, Reuters reported on Tuesday.

"Cracking down on unlicensed drivers is legal but there is currently no law governing app service providers, who offer an information service," Zhao Zhanling, an Internet law expert, told the Global Times Thursday, explaining why the crackdowns are currently confined to unlicensed individuals and companies.

Despite these incidents, industry insiders still expressed optimism, noting that there is a misconception between how the general public and industry players view the news.

"It is really case-specific among different localities, and so long as we operate according to the law, our business will be safe," a staff of a taxi-hailing service told the Global Times Thursday on condition of anonymity.

"In Shanghai, where the license system is transparent and well-established, law enforcement officers can easily identify illegal operational cars," he said.

Some cities issued licenses and companies like Kuaidi Dache and Didi Dache could find legal partners to start their business.

"Other cities may not issue these licenses at all, or impose a complicated and less transparent system, which is a concern," he noted.

The transportation authority in Zibo, a city in East China's Shandong Province, for instance, said on Wednesday in response to a reported planned introduction of Didi Zhuanche that any car-hiring service offered by cars not registered under local taxi companies are illegal, local newspaper Qilu Evening News reported.

As of June, taxi app users had topped 49 million, accounting for 9.3 percent of the country's mobile Internet users, according to figures released in July by the China Internet Network Information Center.

The latest available data provided by Beijing-based consultancy firm Analysys International in November showed that the country's taxi-hailing app accounts had hit 154 million as of September, with Kuaidi Dache and Didi Dache holding 54.4 percent and 44.9 percent of the market, respectively.