Wall Street Journal: For Cabs in China, Traffic Isn’t Only Woe

15 January 2015

China Labour Bulletin is quoted in the following article. Copyright remains with the original publisher.

Jan 14, 2015

SHANGHAI—Even as investors bet on a new generation of ride-hailing Chinese smartphone apps, taxi drivers in China are citing the apps’ proliferation as a reason for strikes that have idled cabs in cities across the country.

Taxi drivers and experts say the apps from companies including Uber Technologies Inc. are only one factor. Local regulations are perhaps a more important source of discontent, as many Chinese cities try to keep higher prices from hitting consumers.

On Wednesday, taxi drivers in the northeastern city of Changchun entered a third day of strikes, according to drivers. “We can’t get by on such a small income,” said a cabdriver surnamed Chen, who said he earns only 50 yuan, or about $8, a day after expenses.

Drivers in the eastern city of Nanjing went on strike Friday after a cut in government-mandated taxi fares. They also protested what they consider high leasing fees paid to taxi companies, which driver Jiang Jian said cost him 4,600 yuan a month. “After taking into account the vehicle-purchasing cost, the license fee and maintenance and repair costs, I earn only about 4,000 yuan a month,” he said, who with a friend splits a 12-hour and a five-hour shift. “That’s too little.”

Taxi-driver strikes have also hit the southwestern city of Chengdu, the eastern inland city of Nanchang, the northeastern city of Shenyang and the eastern coastal city of Qingdao, according to local media reports and China Labour Bulletin, a rights group based in Hong Kong.

Traffic officials in those cities didn’t respond to requests for comment.

Yang Ying, a marketing executive for an insurance company in Nanjing, said the strike was an inconvenience. “There were few taxis on the street last Friday. I had to take public transportation to meet customers,” she said.

Like many places around the world, Chinese cities limit the base fare taxis can charge passengers. Though current headline inflation figures are tame, city officials have traditionally tried to curb perceptions of inflation in the fast-growing country. The city of Beijing raised the base fare in 2013 to 13 yuan from 10 yuan, for the first increase since 2006. Local governments also limit the number of licenses for taxis, increasing the cost of a license and leading to taxi shortages, say activists.

To address that, companies have launched smartphone apps that allow passengers to negotiate fares with taxi drivers in exchange for a ride, or to tap a privately run but licensed fleet for a higher price.

The apps are popular with investors. Kuaidi Group, which is backed by Alibaba Group Holding Ltd. , is receiving about $600 million of fresh capital, including an infusion from Japanese telecommunications company SoftBank Corp.Didi Dache, which is backed by Internet conglomerate Tencent Holdings Ltd. , raised more than $700 million in funding last month.

Taxi drivers complain that some passengers are using the apps to hail rides from unlicensed, private drivers. “With earnings so low, drivers understandably get angry when their business is poached by unlicensed cabs that are not subject to the same burdensome regulations as they are,” said Geoff Crothall, a China Labour Bulletin spokesman.

“Many of my colleagues have quit. They are now unlicensed drivers, using mobile apps such as Didi Dache to pick up passengers. They earn more than twice than I,” said Mr. Jiang, the Nanjing driver. “If the government stands by in the face of unlicensed taxis, I will also quit next year when the contract ends.”

The app providers dispute that they play a significant role. Kuaidi “chauffeurs passengers in a more efficient manner. It also offers a new revenue resource for taxi drivers,” said spokesman Ye Yun, who added that taxi strikes were common before the apps. Zhang Zhenyu, a Didi Dache spokesman, said the market is different because a passenger using the app could end up paying triple a normal fare, so app providers seek different customers.

Uber, based in San Francisco, declined to comment. In the past, it has said it targets different customers than taxis because its main business offers licensed cars at a much higher fee than taxis charge.

Chinese officials in official mediahave praised the apps as innovative. But China’s Ministry of Transport said last week that it will forbid unauthorized private-car owners from using the ride-hailing apps to pick up passengers for profit. The move isn’t likely to affect the main businesses of the app providers, which generally connect passengers to cars owned by rental agencies, taxi drivers or other third parties. Still, it could place new limits on their smartphone apps and increase regulatory scrutiny.

Taxi strikes generally ebb and flow with the broader economy, which has experienced slower growth in recent quarters. The previous widespread taxi-driver strikes in China occurred six years ago, when the global financial crisis took a toll on China’s economy. Drivers are also benefiting less from lower global oil prices, as Chinese regulators moderate price changes there.

—Rose Yu

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