Tag Archives: Siyue Peng

Didi Taxi: A Revolution in Public Transportation or a Cause for Conflict?

By Siyue Peng

Uber, a revolutionary company, has been ambitiously expanding its global influence. With a financial valuation well beyond 50 billion dollarsUber is fully capable of exploring the market and attracting consumers before worrying about its profits. Didi Taxi, a similar company based in China, imitates the same strategy and currently has over 90% of the market share in China. The number clearly shows that Didi Taxi is taking control of the Chinese market, but the conflicts between taxi drivers and Didi drivers continues to be an issue. The question that remains is whether Didi Taxi’s revolution in public transportation outweighs the conflict and struggle among competing interest groups?

Didi Taxi was established in 2012 in Zhongguancun, Beijing, the Chinese version of Silicon Valley. It merged with Kuaidi Taxi, one of its primary competitors in 2015. This strategic cooperation pushed the company to its leading position in the current market. Yet metropolitans like Beijing, Shanghai, and Shenzhen where the population is over 10 million, and other large-scale cities, such as the capitals of each province, have difficulty accommodating the transportation needs of their residents. Admitted or not, Didi Taxi does play a role in utilizing all of the available transportation resources in a more efficient way. Different from Uber whose principle is to overturn and to replace the taxi industry, Didi Taxi desires to provide local taxi drivers with the convenience to readily communicate with the geographically closest consumers. And meanwhile, it gives an opportunity to other drivers who want to get into the industry at essentially no cost. Didi calls their fleet of non-taxis “special cars.”

From this perspective, Didi Taxi seems to be a hero who saves millions of people’s time and efforts on the road. Then why is there still a conflict; because those “special car” drivers compete with local taxi drivers with certain unfair advantages. In China, all of the legally approved taxi drivers have to have a government issued taxi license, which costs a significant amount that varies among regions. And there is a relatively complex and standardized legal regulation on the industry, including the explicit clarification on the responsibility of each taxi driver. Further, so far, Didi Taxi never hesitates to give a considerable amount of subsidy to the “special car” drivers. The subsidy for drivers is equivalent to a discount for consumers; therefore, both drivers and consumers are benefiting from the rising industry. Price advantage is significant because a taxi service is price elastic, especially during recent years when alternative industry has been rising. Though these factors are not fixed and cannot exist in long term, many taxi drivers still feel that their business is taken away from them. Not to mention that the taxi industry in China is known for being unprofitable and extremely exhausting, considering the relatively high cost of operation and long hours of working. Consequently, the frequent occurrence of conflict between the taxi drivers and the “special car” drivers is not surprising. Since the beginning of 2015, taxi driver strikes have occurred in cities such as Changchun, Nanjing, Jinan, and Chengdu. The frequent strikes demonstrate how threatened all of the taxi drivers feel by the controversially unfair competition. On June 12th, two local taxi drivers in Hangzhou intentionally created trouble for a “special car” driver and caused many other drivers to seek out revenge. The situation was only under control when the local policemen arrived. Similar cases happened in other cities as well.

Based on the data, there are approximately 1.3 million taxis in China, which gives a rough estimation of about 2 million taxi drivers. And according to the president of Didi, Liu Qing, the former Asia Pacific Director of Goldman Sachs, the number of “special car” drivers will exceed 1 million. Without formal regulations constituted by the government, or an effective negotiation between the interest groups, the conflicts will transmit from an occasional event to a normal social phenomenon.

Even though the government has not announced any legal regulations on the currently chaotic market yet, it has done something. On July 23rd, eight of the transportation related departments in Beijing had a meeting with Didi, Uber and other similar companies. While the meeting was happening, the Beijing transportation and management team caught a total of 2147 illegally operating private cars and rental cars, and 1211 of them had something to do with Didi. While the government’s action might alleviate the tension in the transportation industry to some extent, it cannot be a long-term strategy because of how costly and inefficient it is since the responsible departments cannot simply assign hundreds of policemen to check on every single suspicious car on the streets. And a complete elimination of all of the “special cars” is not the government’s intention anyway. On July 28th, the director of Shanghai’s Municipal Transportation Department claimed that hopefully the “special cars” and the taxis could cooperate and coexist in harmony. In order to achieve the goal, the “temporary regulations on the management of online reserved taxi business” is about to be announced. Moreover, he stated that as long as the special cars strictly follow the regulations, Shanghai would consider the possibility of permitting a company like Didi with an operational license.

Accordingly, it is difficult to readily categorize Didi as either a source of conflict or a pioneer that leads a revolution, because the upcoming policies will have vital impacts on the market. And since Didi cannot possible provide subsidy to its drivers forever, eventually the “special car” drivers will compete with the local taxi drivers on a relatively fair stage. No matter what happens, the residents are benefiting from the competition by having more transportation resources available at a lower cost.

Photo Credit Simon Song (as found on http://www.scmp.com/)