Uber sidesteps taxi-app ban in China

Updated: 2015-01-12 10:55

By LIAN ZI in San Francisco(China Daily USA)

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Uber, the US app-based transportation and taxi company, seems to have escaped China's crackdown on cab-hailing apps.

"The business is running as usual,"Huang Xue, spokeswoman for Uber in Shanghai,told China Daily on Jan 10 in an email.

China's Ministry of Transport announced on Jan 8 that every (cab-hailing) app company should abide by transport market rules, take their responsibilities seriously, and ban private cars from operating on their platform, even though the ministrysaw a "positive role" for apps that work with licensed operatorsin serving the differentiated transportation market.

Unlike some reports that Uber would be hurt by the new regulations in China, its operation was not impacted much.

Chinese authorities are mainly concerned about apps that allow hail lifts from cars that are privately owned, the spokeswomansaid. "However, unlike acting as an app-based cab-hailing company that collaborates with private drivers in other countries, Uber transformed its business model in China and worksonly with licensed car-rental firms."

But it is still unsure whether the company's "People's Uber", a ride-sharing programthat will be stopped under the new rule, even though it hasn't been profitable. The service aims to match private drivers with people looking for a lift, and the only money exchanged is what the passenger pays the driver to cover the gasoline costs. Uber didn't immediately reply to a message seeking comment on "People's Uber".

The company also said it will work with authoritieson adopt appropriate regulations for new technologies that can help solve urban transportation issues.

"Uber respects the key role the government plays in ensuring that its citizens have access to safe, affordable and efficient transportation options," the spokeswoman wrote. "We are also pleased to see the Ministry of Transportation confirming the value and benefits that innovative mobile Internet technologies bring to the transportation industry."

"It is right for Uber to localize its strategy and give up its app-based private taxi model in China," said Zheng Yuhuang, a marketing professor at Tsinghua University. "Collaborating with local legitimate car-rental firms, especially those state-owned ones, could help Uber fit the Chinese legal system and market."

The company still faces hurdles expanding in China because the ride-hailing business is still in a gray area. Companies such as Uber should make sure their businessescomply with local laws and regulations "to avoid more legal risks in the future", said Zheng.

Meanwhile, Uber is facing competition from strong local players such as Tencent Holdings Ltd-backed Didi Dache, and Alibaba Group Holdings Ltd-backed Kuaidi Dache. It is alsoexperiencing pressure from traditional taxi drivers whose interests are carved up by the rise of Uber and other similar apps, said Zheng.

Uber, which entered the Chinese market in February 2014, currently operates in nine cities on the Chinese mainland: Beijing, Shanghai, Guangzhou, Chengdu, Chongqing, Hangzhou, Tianjin, Shenzhen and Wuhan.

Chinese Internet giant Baidu Inc confirmed in December that it had been Uber's latest investor. Both Uber and Baidu didn't disclose the amount of the investment.