Ride-hailing services including Uber and rival Didi Chuxing received the green light from the Chinese government on Thursday and will be able to legally operate within China by Nov. 1 of this year. The approval is welcome news to Uber and other app-based ride-hailing services, which often face resistance and sometimes even lawsuits as governments around the world adapt to the challenges of regulating the new business model.
The Chinese government will dictate stipulations for the ride-hailing apps: drivers must have a minimum of three years driving experience, and cars are required to have fewer than 600,000 km on them, for example. However, the guidelines are less restrictive than an earlier proposal which would have required even stricter qualifications for drivers and the use of commercially registered vehicles.
Didi Chuxing, the most popular ride-hailing service in China ahead of Uber, issued a statement after the announcement, saying, “As a member of the rideshare community, DiDi welcomes the government’s endorsement and encouragement of the industry and China’s emerging sharing economy.”
Lack of approval has not stalled the use of ride-hailing apps within China, though without the stamp of legality, drivers can face arrest and have their cars impounded if caught. Still, Didi Chuxing alone employs over 14 million drivers and boasts 300 million active users.
The potential for profits from ride-hailing services in China have attracted the eyes and wallets of big investors. Didi Chuxing is backed by tech companies like Apple and Alibaba, a Chinese e-commerce giant. Apple invested $1 billion in Didi in May, bring Didi’s funding to $3 billion and value to $26 billion, according to Bloomberg sources.
The Chinese government’s guidelines will need to be accepted and enacted in provincial and municipal areas before Didi Chuxing and Uber are fully legal, but this forward momentum toward acceptance in the Chinese economy is a welcome contrast to some of the scrutiny ride-hailing apps face in other countries, including in the United States.
UberPop, an Uber service which offers cheaper rides because of less stringent requirements for driver certifications, has been banned in Germany, France, and the Netherlands, mainly for safety or insurance concerns. As the Monitor’s Olivia Lowenberg reported in June, the ruling cost Uber "a $907,000 fine over allegations of deceptive and illegal business activity.” The bans on UberPop and the concern about possible fines and legal troubles have made it difficult for Uber to grow overseas.
Uber faced criticism and a boycott by Saudi women when it introduced the app in Saudi Arabia, where women still do not have the right to drive.
The company has faced lawsuits within US borders, too. Concern regarding the perceived leniency of Uber’s driver background checks has led to lawsuits against Uber from the cities of San Francisco and Los Angeles. Unlike taxi services, Uber does not require fingerprints from drivers and background checks only go back seven years. Uber settled the lawsuits for $10 million and stopped describing their background checks as “industry-leading”.
The Chinese government’s approval of ride-hailing services could lead to a more positive international reputation for and wider acceptance of ride-hailing apps.