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New local policies on car hailing service to impact the industry

Beijing, Shanghai, Guangzhou and Shenzhen, the four key tier-1 cities, released their draft regulations on online car hailing service on October 8.

Another shoe finally fell on the ground, some say, the first being the policy released by several ministries on July 28 to legalize the industry. In the guidance policy, private car owners are allowed to provide paid rides, which is once forbidden and fined.

But before the release of new local specific polices, such practice is still fined in many places.

The long-awaited local policies finally came, but not as many expected.

Take Beijing’s policy for example. A local household registration, a local license plate and a local drivers’ license are musts. The car must be either a 5-seater sedan with displacement of no less than 2.0L or 1.8T or a 7-seater with displacement of no less than 2.0L. The driver must not have more than 5 traffic violations within the last year.

Shanghai also requires the “three locals.” A gasoline car should have a wheelbase of no less than 2,700 mm and a NEV no less than 2,650 mm to offer car hailing service.

Shenzhen and Guangzhou’s policies are relatively more liberal, but have their own specific requirements.

Considering the importance of these key cities, other cities may follow and release similar polices soon.

For policy makers, they have abundant reasons. With the flooding in of cars and drivers involved in the business, traffic congestion worsens, ride experience unpleasant and sometimes human safety at risk.

Beijing, for example, has a motor vehicle parc of 5.6 million. With the wild growth of vehicles, traffic congestion has expanded from downtown areas to the suburbs. Measures such as vehicle restrictions based on license plates ending in odd or even numbers and car purchase lottery have been in place for years to curb the problem. If the administration of car hailing service slackens, it would be detrimental to existing measures, explains one official.

But for other parties, these policies seem a bit “crude and unfair.”

The “three locals” requirement would rule out a majority of drivers and requirement on cars would drive many cars out of the car hailing business.

For riders, fewer cars mean higher fares. For the car hailing service platforms, affected the most by the new policies, is another round of consolidation imminent?

The top industry player Didi Chuxing believes new local policies would sharply reduce supply of vehicles, lower mass public’s commuting efficiency and millions of drivers could lose their jobs and income. Didi Chuxing owes much of its success to a light asset operational model.

Both the state policy and the newly released local policies will take effect soon on November 1. Their long effect on the industry will play out over the coming months.

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