Apps disrupt taxi companies’ monopoly over the industry

By Liu Sha Source:Global Times Published: 2015-1-21 20:23:01

Traffic police stand by a taxi on the street in Shenyang, Liaoning Province on January 4 during a strike by thousands of taxi drivers. Photo: IC

Yin Hao, 46, who has been working as a taxi driver for nearly 20 years in Nanjing, capital of East China's Jiangsu Province, is considering a change of his job.

He has been offered a driving job with a zhuanche company, a type of car-hire service provided by taxi app companies like Didi Dache and Uber, which target the middle and higher end of the taxi market.

"Working as a zhuanche driver I may earn 10,000 yuan ($1,600) a month, double my current income," Yin told the Global Times.

"As a taxi driver, my income has not changed for years," he said.

His complaints are shared by other drivers working in the traditional taxi industry. The rigid pricing system and increasing franchise fees, which taxi drivers have to pay every month to the taxi companies that employ them, all contribute to keeping their earnings low.

In China, local governments decide the number of taxis that are allowed to operate in a city and distribute a certain number of taxi licenses to local companies. Taxi drivers then pay franchise fees to their companies.

In different cities, the fees range from 3,000 to 9,000 yuan a month. "Every morning I wake up realizing I have to work to pay the fees first, before I earn for myself," Yin said.

Taxi drivers reached by the Global Times said that their companies would find excuses every year to increase these fees.

The Hangzhou-based Qianjiang Evening Post said the fees demanded by Hangzhou taxi companies have increased by 70 percent over the last decade.

Complaints about high franchise fees are long-running but as passengers' needs change, zhuanche, which are often more comfortable and offer a better service, have grown in popularity and put pressure on traditional taxi companies.

This has triggered renewed industrial action by taxi drivers.

On January 4, most people's first working day of 2015, thousands of taxi drivers in Shenyang, capital of Liaoning Province, went on strike. Four days later, in Nanjing, hundreds of taxi drivers stopped working, stranding passengers. Similar strikes also followed in other provincial capitals including Changchun, Jinan, Nanchang and Chengdu.

What they are asking for doesn't vary much from city to city: lower fees and a change to the taxi pricing system to increase their income.

A monopolized industry?

"Not all of us oppose zhuanche services," one of the taxi drivers that took part in the protest on January 4 in Shenyang told the Global Times on condition of anonymity.

He admitted the popularity of zhuanche gave them a new excuse to protest against the long-unsolved problem of high franchise fees.

Zhu Tao, an urban traffic expert at the Beijing University of Technology, said that the taxi industry has been a monopolized industry in China for many years.

"Taxi companies can decide the size of franchise fees and there is no one supervising them," Zhu said, adding that without industrial transparency, it is hard for the public to know whether the fees are reasonable or not.

In July 2013, 3,000 new high-end taxis hit the streets of Nanjing, the first time the city had increased the numbers of taxis available in a decade. The city had decided to up the numbers in preparation for the Nanjing Youth Olympics, but the taxis' high prices scared off many passengers.

The drivers of these new taxis had to pay 9,000 yuan a month to the taxi companies. In Nanjing, the fee for a normal taxi is 4,000 yuan.

"The government sets a goal, the taxi companies bought those cars, but it is us drivers who shoulder the burden," Yin said, adding that in the January 8 protest, most of the protesters were high-end taxi drivers.

"What Nanjing lacks now is not high-end taxis, but a taxi service of good quality. How can angry drivers provide good service?" an urban planner at the Jiangsu Province Communications Planning and Design Institute told the Global Times on condition of anonymity.

Supply-demand imbalance

Beijing, which has 66,000 taxis, has not increased the number of taxis on its streets in over a decade.

"As the city expands by roughly 600,000 people every year, demand has certainly increased and more people want a quality service, which cannot be generated by an industry without competition," Zhu said.

Gao Changsheng, general manager at Beijing Changhuade taxi company, told the Global Times that he is not surprised that zhuanche services have attracted so many customers. "Even if thousands more zhuanche cars start to operate in Beijing, taxi companies will not be affected."

"In suburban Beijng, private cars without taxi licenses, or black cabs, are everywhere," Gao said.

His company often receives complaints from passengers who say that drivers refuse to take them to the suburbs, ignore passengers during rush hours or have a bad attitude.

Lou Xianghua, 36, a veteran Beijing taxi driver, said that taxi drivers choose passengers that can maximize their profits.

Zhang Guohua, president of the Comprehensive Transportation Research Institute under the National Development and Reform Commission (NDRC), said the imbalance between governments' supply of taxi licenses and market demand is the main problem facing the taxi industry.

Lou's income increased in 2013, when taxi fares were increased for the first time in seven years. The initial fare was set at 13 yuan, up from 10 yuan. "Complaint calls have reduced by nearly 50 percent following the price adjustment," Gao said.

The rigid pricing system is another problem caused by the monopoly, as if pricing systems don't change, taxi drivers' incomes do not increase, Zhu said. "But without competition and improved services, passengers will not accept price adjustments."

Zhuanche services prove that people are willing to pay a higher price to get good service, Zhu added.

A chance to reform?

The Chinese government has traditionally seen the taxi industry as part of the public transport system, rather than a private industry. However, many experts now suggest it is time to marketize the industry and allow public demand to decide the number of taxis in any one city and for competition to improve services.

As zhuanche services are private businesses, rather than government-facilitated monopolies, their popularity may provide a chance for the taxi industry and local governments to reflect on their own practices and reform, experts have said.

Taxi drivers like Yin in Nanjing are considering quitting their jobs with taxi companies and joining local car rental firms that have signed contracts with taxi app companies.

"If more of us leave taxi companies, they may reflect on what they have done wrong and change," Yin said.

Newspaper headline: Cabbies on strike

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