Internet & Tech

Not in the driving seat

Why top car-hailing service Didi isn’t welcome in Shanghai anymore


Clampdown on Didi drivers

Didi Chuxing had a dreadful 2018, after two high-profile murders of passengers by its drivers. Since then China’s leading ride-hailing service has been engulfed in a regulatory storm. At one point in late 2018 inspectors from more than 10 government agencies were tasked with ensuring that it improved the supervision of its services, Caijing magazine reported.

All that scrutiny has been costly perhaps nowhere more so than in Shanghai where Didi has been slapped with two fines in as many months.

Earlier in August, the transport and communications authorities in the city launched a joint inspection of all the car-hailing platforms. Didi was fined Rmb200,000 (around $28,000) as it was found to be sending pick-up orders to drivers and vehicles without proper operating qualifications.

The fledging car-hailing unit of Meituan Dianping, the country’s biggest food delivery platform, was fined Rmb20,000 for failing the same inspection.

A month earlier Didi and Meituan had been fined a much larger Rmb5.5 million and Rmb1.5 million respectively for the same violation. Both companies risk having their services suspended if they flunk future checks, the Shanghai transport authority warned in a statement.

The regulators said a central government directive published in May last year already requires car-hailing firms to eliminate unqualified vehicles from their fleet. Yet according to the latest findings in Shanghai, more than 82% of Didi’s drivers have been driving unlicenced vehicles.

This seems to be a problem that Didi will struggle to rectify quickly. Shanghai and many other cities now want car-hailing firms to register their drivers and the vehicles they use, which are predominantly ‘private’ passengers cars. However, once registered as part of a car-hailing fleet those vehicles are classified as ‘commercial’ passenger cars, Sina Finance notes. This reclassification loads their drivers up with higher insurance fees and mandatory maintenance costs. As a result, drivers have been reluctant to go through the full registration process – despite a straightforward licencing process online.

“Only 30% of Didi drivers are now properly licenced. Its service would be paralysed immediately should it sever ties with all of its unqualified drivers,” Sina Finance added.

The action against Didi has also stoked criticism that local governments have an ulterior motive in the crackdown. Typically, they have shareholdings in their city taxi fleets, leading to allegations that they are trying to make life more difficult for the hailing apps from the private sector (a fight we first touched on in WiC267, back in 2015).

Some local authorities are also concerned with how to handle a major influx of migrant workers, many of whom are working as drivers. Spurred by the rapid growth of the sharing economy, this new generation of migrants have also taken jobs in food delivery in major cities.

There were more than 521,000 drivers in Shanghai who worked for the hailing apps at the end of last year (with more than 400,000 working for Didi). Less than 35,000 of them had registered properly. And probably more significantly, more than 90% of the drivers don’t have a Shanghai hukou, or local household registration (implying that they are migrant workers).

The Shanghai municipal government has been keen to discourage more migrants from seeking work in the city. It aims to cap the local population at 25 million in the decade after 2020 but the problem is that there are already 24.5 million people residing in Shanghai. Hence the authorities want all the car-hailing drivers to have a Shanghai hukou (another key reason why so many drivers haven’t bothered registering). Didi’s best hope is that the rule gets relaxed – perhaps it will if enough Shanghainese complain that the policy is making it increasingly hard to get around the nation’s financial capital.

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