In China, As In The U.S., The Fight Over Ride Hailing Is Local

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On the fringes of Beijing, surrounded by affluent housing compounds and the headquarters of some of China's leading high-tech firms, there's a slum folks call Didi Village.

Cars with mainly out-of-town license plates are parked under makeshift shelters outside crowded, ramshackle dwellings.

Many of the village's inhabitants are migrant workers who, until recently, worked for Didi Chuxing, China's largest ride-hailing service.

One of them, 35-year-old Wang Fei, started driving last July. Back then, he recalls, Didi and its main competitor, Uber, were locked in a price war. They were offering bonuses to drivers and steep discounts to riders in order to grab market share.

"We got into this business because of the bonuses," he recalls in an interview in the village. "Without them, there's no point. And then, they started banning out-of-town cars and drivers."

These bans were announced by some local governments in January, apparently intended to protect local jobs and keep migrants from swelling urban populations.

The political battle in China underscores a key fact about ride-hailing around the world: they're fighting to exist and that fight is supremely, intensively local.

"Now we can't make any money"

In China, it's a migration issue, with local regulators concerned that these ride-hailing jobs are bringing too many migrants into their cities. Meanwhile in the U.S., municipalities are often concerned for the legacy taxicab industry. In both countries, the companies have to pour resources into lobbying and public relations campaigns.

It's easy to gloss over what these ride-hailing companies have in common because they're also battling each other to exist. Uber went into China and ended up in an aggressive price war with Didi (which gave riders very cheap rates). It finally ended when, last August, Didi bought out Uber's China arm, creating a company worth an estimated $35 billion. Rides have become scarcer and scarcer, and some commuters say they've gone back to hailing taxis.

Wang Fei said he was forced to quit driving for Didi and go back to his old job moving homes.

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"Hundreds of people in this village thought they had a chance to make money and bought cars. Now we can't make any money, and we still have to pay for our cars' maintenance," he says.

Wang Jun, an expert on corporate law at China University of Politics and Law in Beijing, describes the local rules as a step backward.

"As soon as they started trying to regulate it like the taxi industry, it undermined the legalization of the ride-hailing business," he says.

In Beijing and many other cities, taxi companies are often monopolies with ties to municipal governments.

Wang Jun argues that the government's strategy is to try to force the ride-hailing companies into a higher price segment, so as not to compete with taxi companies.

The local regulations have also apparently hurt the government's strategy to rescue China's rust belt.

Didi says that it provided 17 million part-time jobs last year, including 2.4 million to workers laid off from state-run coal and steel plants last year, or about 60 percent of the total.

It's not clear where these workers will now go.

Wang Jun says that in making the policy, China's government apparently tried to balance the interests of the competing parties.

"On one hand, they considered the jobs created by ride-hailing services," he says. "But on the other, they also considered the taxi driver's income, and the interests of the taxi companies."

A partnership

Wang Jun says he advised the government not to make its ride-hailing regulations too restrictive.

"Our main concern is that the regulations will kill off this fledgling industry," he says, "in which case the taxi industry won't improve, and people's transportation won't get better."

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He draws several conclusions from the fate of the ride-hailing business in China.

"We mustn't make rules too hastily. We've got to give innovations time and space to develop," Wang Jun says. "Also, we shouldn't stifle the development of innovative industries by forcing them into the regulatory frameworks of existing industries."

Recently Didi signed an agreement with the government in Shenzhen, China, to share data that the private company is collecting — for example, on ridership trends, where there's congestion and at what times. The purported purpose is to help a municipality troubleshoot transportation and improve it.

That novel partnership may be politically savvy. If Didi wants to survive, the company may benefit from becoming indispensable to potential enemies.

Back in Didi Village, women stir-fry cured pork for dinner. It's a specialty of China's southwest region of Chongqing, where Wang Fei and many of the drivers come from.

Wang criticizes the local government regulations as backward-looking.

"The central government's policies aren't bad," he says. "But they change when they get to the local level. Local governments just don't obey Beijing."

But just in case, Wang still has his car, and if the rules change again, he says he can go back to driving for Didi.