Uber and Didi face losing many of their drivers as China frames new rules

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Tech in Asia

Banned: Small cars like the one pictured center would be prohibited from use with Uber and Didi in China if new regulations come into force. Photo credit: Jakob Montrasio.

Uber and Didi face the loss of many of their drivers and cars as three huge Chinese cities yesterday issued draft municipal ride-hailing regulations. With proposed restrictions on who can drive and what type of vehicles may be used, it could devastate the services offered by the competing apps in Beijing, Shanghai, and Shenzhen.

“There will be sharp drop in market supply of rideshare vehicles. In Shanghai, for instance, less than 20 percent of existing rideshare vehicles meet the proposed wheelbase requirements,” said Didi in a public response on its social media channels Saturday evening. There’s also a stipulated minimum engine size (1750ml/1.8T/2.0l) that would exclude many of the small and mid-range cars used by drivers on Uber and Didi.

Many existing drivers could also be barred from making money via the apps due to the requirement that each driver should have the residency registration (known as hukou) for the city where they work. But many migrant workers from China’s poorer provinces do not have that documentation.

“There will be significant decrease in the number of rideshare drivers. Of over 410,000 activated driver accounts in Shanghai, only less than 10,000 are residents with Shanghai residency registration,” continued Didi’s statement, an English translation of which was provided to Tech in Asia.

We’ve also contacted Uber on this matter.

Rising costs

Didi warned that the “efficiency of cities will be severely impacted” by such a move, and the cost of grabbing a car through the mobile app will rocket.

“App-based rideshare becomes affordable thanks to the high cost efficiency of privately-owned vehicles. Operating costs are bound to rise sharply if only [Volkswagen] Passat or Audi A4L-level luxury sedans are allowed. In some cases, rideshare fares might rise to twice as much as comparable taxi fares.”

Didi has close to 300 million users across more than 400 Chinese cities, with passengers taking 16 million rides per day. The startup has raised billions in funding to fuel its growth in the past four years. It also runs Uber’s China division after the shock buy-out this summer.

Uber and Didi might have been forgiven for thinking that a smoother road lay ahead after China fully legalized ride-hailing apps that make use of private vehicles. But that nationwide legislation looks set to be hit by city or province-wide amendments.

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