Shanghai cracks down on booming taxi apps
THE Shanghai city government has followed Beijing's lead by restricting the use of increasingly popular taxi-booking apps, putting investment into the technology by local and foreign companies at risk.
New rules ban the use of booking apps by cab drivers during rush-hour periods and ban their use entirely by private vehicles licensed for hire, according to a statement released late on Wednesday by the Shanghai Municipal Transport and Port Authority.
The fast-growing sector attracted over US$43 million (S$54 million) in investment over the last two years, according to Internet-data firm iResearch.
The market is dominated by Didi Taxi and Kuaidi Taxi, backed by Tencent and Alibaba respectively, which together held almost 90 per cent of the market by daily taxi-app orders last year, according to iResearch.
Tencent and Alibaba have been locked in a battle to attract customers, offering generous rebates to drivers and riders to use their apps and payment systems.
Taxi-booking apps, which allow users to "bid" for cabs by adding a flat fare, essentially allow customers and drivers to cooperate to break through government price controls on fares and negotiate a market price for transportation.
There have also been complaints that people are having increasing difficulty hailing cabs on the street, as many drivers refuse to pick up customers paying normal fares.
Instead, taxi drivers cruise the streets with their eye on a collection of cell phones mounted on their dashboard running different apps, all searching for fare bids.
Under the new rules, Shanghai's cabbies will not be allowed to use the apps while driving, and can be fined for refusing to pick up ordinary-fare passengers.
The new regulations could also hit services like United States-based Uber, which was recently launched in Shanghai and other Chinese cities, and allows passengers to book private cars.