Uber Faces Regulatory Trouble In Three Major Chinese Cities

New regulations imposed by the Chinese government do not bode well for Uber and Didi. Both companies are on the verge of losing their drivers and cars as a result. With new restrictions on who can drive which vehicles being proposed, things aren’t looking good for the ride-sharing industry. For now, only three Chinese cities are contemplating these changes, but others may follow suit.

Big Changes Are Coming To Major Chinese Cities

To put this news into perspective, the cities of Shenzhen, Shanghai, and Beijing are looking to impose new municipal ride-hailing regulations. If these proposals are approved, city officials can determine who can drive and which vehicles they are allowed to use. If this were to pass, the number of potential drivers for Didi and Uber would dwindle very quickly. In addition, most of the current “official” drivers could find themselves barred from making money through ride-hailing apps as well.

These proposals require every driver to have a residency registration for the city in which they work. Right now, that is far from the case for most Uber and Didi drivers. Migrant workers, for example, do not possess this documentation.

Keeping in mind how there are over 410,000 active driver accounts in Shanghai alone, those numbers could see a sharp decrease in the coming weeks. An interesting fact is that less than 2.5% of those drivers are actual Shanghai residents. It is expected that similar numbers apply to Shenzhen and Beijing as well. Although the proposals still have to be approved, the idea sets a precedent for other countries around.

 

One downside to supporting these regulations is how cities will become far less efficient as a result. Moreover, the prices for ride-sharing solutions will skyrocket, which will not benefit residents and business people either.  The reason Uber and Didi are able to offer such low pricing to their users is due to the vast availability of drivers in these regions.

More importantly, giving city officials the option to determine which cars can be driven is a big step backwards. If only specific models and brands are allowed, ride-share fares will surge much higher than taxi fares, which will hurt ride-sharing in general. Uber and Didi will do everything they can to oppose these guidelines, but it remains to be seen how successful their efforts will be in the long run.

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