China is the First Country to Legalize Car Hailing Companies

Last Updated: 28 August, 2016
ride sharing

The on demand ride sharing service is a service that ensures shared ride within a short period of time. This service uses some of the advanced technologies like the social networks, GPS navigation device and smartphones. These technological advancements like the social networks are used to establish accountability and trust among the riders and the passengers; the navigation device is used to determine the route of the scheduled rides. With the advancement of the smartphone technology, the riders can download the ride sharing app and book their ride at anytime and anywhere.

The ride sharing apps make use the optimization algorithm that helps to match the rides with the nearby drivers who are available to pick up a ride and it also manages the payment process. The experts in the transportation field call this service as the ride-sourcing service because it sources rides for the drivers using the ad-hoc network. Some of the online transportation companies are Ola, Uber, Didi Chuxing, Lyft, Haxi and Via.

The ride sharing companies have gained positive response among the commuters, but face a lot of issues like licensure, insurance, regulation and others. Some of the cities around the world have banned the ride sharing service in their area. Similarly the ride sharing companies face opposition from the public transport operators and the taxi companies.

National legalization

In many countries the car sharing companies are banned by the country’s transportation department because of many issues like the regulation and license issues. The leading ride sharing giant in the United States of America faces many legal issues in many cities in the US and other countries around the world. The Chinese government recently announced that they have legalized the car hailing companies. Thus, the local giant Didi Chuxing, the American transportation company and other ride sharing companies can legally operate their service in the country.

Features of the rule

The proposed guidelines comes into effect from this year November 1st and they are,

  • The ride sharing companies must station their servers on the mainland.
  • The development of non-cash payments, sharing economy and the online car booking will be encouraged by the government.
  • The on demand car sharing service will become legal.
  • The user details and the information collected from the user by the ride sharing company must be stored for 2 years within China.
  • The ride sharing companies must provide insurance that covers the third party coverage and sign labor contracts with the drivers.
  • The ride sharing vehicle must not have seats more than seven and the drivers working under the ride sharing company must have more than 3 years of experience in the car hailing platform.
  • Once when the vehicle reaches 600,000 km, it must be retired from the service.
  • The vehicles that are used to hail the riders must be less than 8 years.

Traditional taxi industry

The Vice Minister of Transport classifies the ride sharing platform as the Internet booked taxis. The main goal of the car hailing services is to provide a good riding service to the riders. The Dazhong Transportation Group’s President, Yang Guoping said that the new legal guidelines proposed by the government will not have anegative impact on the taxi industry. According the reports, the transportation experts said that the licensing requirements and there are possibilities that the local transportation authorities might restrict the transportation license as it might limit the ability of the car hailing company to expand its operation.

For the past few years, the drivers from the taxi industry have initiated many strikes against the car hailing company across the world. The main reason behind the strike is that the government or the local transportation department has not imposed any regulation on the ride sharing company.

Implementation of the rule

Even though the government nationally legalized the ride sharing companies, the factors of implementing the process will be taken care by the provinces and the cities in the country. The rule also does not address the facts like the heavy subsidization, but the rule says that the transportation companies cannot charge the prices that are lower than the cost.

The rule does not explain whether the cars that are licensed out of Beijing would be permitted to take the price in the city and also whether the drivers can work for two companies at the same time. However, the drivers those who have registered only can offer rides within the country.

Opinions of the Ride sharing companies

In major cities in Chine and around the world have banned the ride sharing service because of various factors like license issue, insurance and labor contract issues, regulation issues and others, but for the first time the Chinese government has legalized the ride sharing companies nationwide.

Didi Chuxing

The leading company in China and is the local competitor for the US giant, Uber. The company has raised seven billion dollars in the recent times, on hearing the announcement the officials of the company said that the regulation proposed by the Chinese government mirrors the positive and open mind of the country towards the online transportation firms and the shared economy. The company is happy with the new rule and is getting ready to meet the requirements of the new regulation. According to the regulation, the company has to adopt the rules in both the municipal level and provincial level across China. The company has to obtain and secure a new license to operate their business.

Earlier the company reported that they have allotted fifteen million dollars as the development fund to integrate their operations in line with the proposed regulation. The company has three hundred million users with ten million rides with fourteen million drivers riding each day. The senior director of the international strategy, Li Zijian said that the transportation company has reached 1.1% of the consumers in the country; he also estimates that the online ride sharing company is worth two hundred billion dollars in the Chinese market within the next 5 years.

Uber

The leading online transportation ride hailing company in the United States of America and it values sixty two billion dollars. The car hailing company has its service operating in many cities across the countries around the world. Travis Kalanick, the Chief Executive Officer of Uber has said in a meeting that the Chinese market is one of the most important markets in establishing their business. The company has raised funds to establish a strong foundation in the Chinese market and lead the local giant Didi Chuxing.

On hearing the announcement regarding the new guidelines, the Uber China welcomes the new rule and they informed that they are looking forward to work with the policy makers and establish their business in the country by following the proposed regulations. The company is planning and working towards securing a new license that abides the regulations and rules proposed in the new guidelines.

The company acquired one billion dollar from Saudi Arabia and they also have funds coming from other sources. The ride sharing company operates in more than sixty cities in China and is planning to expand their operation further more.

Author: Anand Rajendran is CEO and Co-Founder of Dectar, best PHP scripts Development Company located in India. Dectar is a part of Casperon Technologies a leading social and mobile development company which is Developing Uber for X apps for the past 3 years. I’m a Tech geek, Digital marketing expert, Entrepreneur, and Atheist who loves to write everything about PHP Scripts and mobile application development.

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