As Uber is set to expand services to China, the communist country is seen to have drafted a plan to ban the use of online-booking taxi services.
Under the proposed rules which could deal a blow to some companies like Uber and Didi Kuaidi, operators should obtain licenses from local authorities in order to provide online booking services, use China-based servers, which will be able to share data with local authorities, and set up local offices.
In addition, the cars that will be used should be registered for commercial use and enabled with GPS devices. Drivers also need to pass qualification tests. Moreover, one draft also forbids drivers from working for multiple ride-hailing app. The draft of the rule was posted on Saturday and is seeking public comment.
This rule will have an enormous effect on the companies that signs up owners of private cars and matches with riders. It will most likely force the companies to use commercially-registered cars and drivers.
An Uber spokesperson said, as posted on Nasdaq, that the company is in close communication with Chinese regulators and would follow all new rules.
As the draft is still up for commentaries from the public, Uber and Didi are awaiting to tap into the market of more than 700 million commuters and a growing middle class that can afford upgrading from traditional taxis. Didi has raised $3 billion and Uber more than $1 billion for the Chinese market alone.
China has been able to catch some 1,200 private drivers from Didi and 170 from Uber that are under suspicion of running illegal taxi services and evading taxes.
On the lighter note, the draft of rules only proved that China is legalizing ride-hailing apps nationwide for the first time, only with tighter rules.
If Didi and Uber wants to be able to get into the Chinese market, they would have to change their current business model and adopt the proposed rules if they are taken into the Chinese law.
