Services help passengers but hit taxi companies
Subsidies provided by some online car-hailing companies pose unfair competition to the traditional taxi industry in China, which is not conducive to the sound long-term development of the domestic market, the Economic Information Daily reported Monday, citing Transport Minister Yang Chuantang. [Special coverage]
"Subsidies are a short-term tactic to grab market share and make a profit. The companies are unlikely to offer subsidies over the long term and without limits," said Yang at a press conference during the ongoing fourth session of the 12th National People's Congress, according to the report.
The rise of the online car-hailing sector in recent years has provided customers with good services, but it also hit the taxi industry, according to experts.
"The hit was quite large because the fee for booking a ride online is low. What's more, plenty of private cars have flooded into the market via online car-hailing apps, trying to compete with the taxi industry," Cai Guangrao, secretary-general of the Taxi Association of Zhejiang Province, told the Global Times on Monday.
But the incentives are unsustainable. For instance, some companies such as domestic leading ride-hailing firm Didi Kuaidi suspended incentives for drivers and customers in Hangzhou, capital of East China's Zhejiang Province, in late 2013, Cai said. Although the incentives were resumed in 2014, such companies will drop incentives after establishing a firm position in the Chinese mainland market.
In October 2015, the Transport Ministry released draft rules to tighten control over domestic car-hailing services as well as rules to promote the sound development of the domestic taxi industry.
"We are further revising and improving the rules and we will actively promote their release," Yang was quoted as saying in the report.
The central government supports the innovative development of the online car-hailing sector and will strive to regulate its sound development, Yang noted.
"Local governments are waiting for the release of the official rules, and then they can relate these rules to their local situations to regulate the sector," said Cai, the secretary-general.
The central and local governments face many challenges regulating the sector, such as striking a balance between regulation and the companies' management of the online car-hailing sector, Zhang Xu, an analyst at Beijing-based market research firm Analysys International, told the Global Times on Monday.
"The central government is expected to delegate some of its powers to the online car-hailing companies," Zhang said.
The government will step up its efforts to improve the service of the traditional taxi industry in order to meet market demand, according to the transport minister.