China to ban use of private cars in online taxi hailing services

The cars being used should be GPS-enabled registered taxis and drivers need to pass qualification tests, according to the draft posted on the ministry’s website seeking public comment.

China’s Ministry of Transport has just issued draft rules that could pose big problems for the ride-hailing service’s efforts in China, according to a report in the Wall Street Journal on Sunday.

Firms like Uber and Didi Kuaidi will have to open conventional offices in China and will need to provide the authorities with information about their drivers, including their identification cards and contact numbers, and to share customer data with local authorities.

Zhang Xu, an analyst at Internet consultancy Analysys worldwide in Beijing, said the proposed rule is not good news for online car-hailing service providers. Ride hailing companies would have to register their cars as taxi services, insure vehicles and passengers and sign labor contracts with drivers.

Uber and Didi Kuaidi, both of which have raised billions of dollars from investors by pitching rapid expansion in China, have spent heavily on subsidies for drivers and consumers to build a following.

Saturday’s statement came two days after Didi Kuaidi was licensed by the Shanghai Municipal Transport Commission to offer private-car booking services. Such companies are encouraged to upgrade their services using mobile-Internet technologies, while cars used by online operators will be barred from roaming the streets to collect passengers, it said.

Chinese car-rental company auto welcomed the rules, saying in a statement its services had been in line with government guidance. The number of seats will be limited to no more than seven in each auto.

The draft rules, published on the website of the Ministry of Transport, said they are aimed at maintaining order by strengthening supervision of online auto hailing apps. But the prospect of tighter oversight in China could also be bad news for Uber, which has aggressive plans to expand in up to 100 additional cities in the country in the next year, the report notes.