Economist: China’s New Cab Strategy

 

I posted an article earlier this past week documenting the quasi taxi service UBER, which is used around the developed world in large urban areas.  UBER is not legally a taxi service, but rather a market intermediary that matches drivers with customers looking for a ride.  The main substance of that article dealt with the lash back that the company, UBER, was receiving from cab unions in every major city from LA to London.  UBER was receiving threats from taxi unions because UBER drivers do not have to become licensed as a taxi company/driver and yet still compete and steal business from taxi  (acting in essentially the same facet as taxi drivers).  Many people are of the idea that if something can be done, then it will be copied and done at a lower cost in China, this holds true only to an extent with UBER.

China has now seen the emergence of several cab hailing apps that remind the average city-dweller of UBER, but which is altogether different and its own thing.  Chinese cab drivers have had a notoriously difficult time making a suitable living historically in the large cities of China.  The cab drivers would have to work incredibly long hours under poor working conditions just to make enough money for themselves and their family.  However, with the emergence of technology and the ubiquitous use of smartphones, cab hailing phone applications have changed the lives of taxi drivers and taxi riders around all of China.  There are several apps currently hot in China right now for hailing a cab, which allow customers to ask for a cab from their phone and incentivize the driver with a decent tip.  The service was also used as a bargaining chip to leverage the government into increasing the minimum cab fare for taxi’s in China.  These apps are unlike UBER in that they help consumers hail actual taxi’s as opposed to some independent third party companies cars like those of UBER.  For this reason, Chinese cab drivers love these app services, so much in fact that the government is having to step in because it is giving some drivers too much of an upper hand with consumers.  I was interested and happy to read this article as it shows how technology and innovation can be applied across the globe to help make the lives of consumers and producers alike.

 

Source: The Economist: China: Cab Fair (Getting Around) May 17th-23rd

4 comments to Economist: China’s New Cab Strategy

  • reed

    I wonder why UBER hasn’t been able to penetrate the Chinese market. It seems like a lot of money could be made there given the huge number of mega-cities.

  • Kuangdi Zhao

    I think Taxi apps that can benefit both taxi drivers and customers. In major cities in China, people sometimes have to wait more than 20 minutes for a taxi. These apps may be able to significantly reduce the amount of waiting time. Also, taxi drivers can use these apps to find where customers are, enabling them not to drive around all the time looking for customers.

  • heardd16

    It is interesting to see private companies making a dent in China’s economy, which often has industries that are dominated under one government run operation, such as China’s State Grid Corporation, which provides all of China’s electricity. Competition to China’s cab drivers from private firms such as the ones Hampton mentioned make the market more competitive and as he said may lead to increased wages. It would be cool to see increased competition in other Chinese markets.

  • CapVandal

    It is interesting that Uber has decided that car service needs MORE intermediation when disintermediation is the trend. That is, in retail everyone is trying to cut someone else out of the supply chain. Amazon is eliminating bricks and mortar, &c.

    In Chicago, Taxi Medallions cost $350,000. This is insane, and is the result of regulation in most areas of the business and no price regulation for medallions. http://chicagolawyermagazine.com/Archives/2013/02/Chicago-Taxi-Law.aspx

    You couldn’t make this stuff up. There are exactly 6952 cabs medallions, with 85 percent to 92 percent of the city’s 6,952 cabs on the street at any given time.

    The result is that the supply of cabs is extremely inefficient. Supply is fixed while demand is extremely variable.

    The archetypical cab is a used Crown Vic that was bought at a police auction. Of course, Crown Vics are disappearing, and some cabs are reasonably nice, but others are sketchy.

    Some parts of the city have virtually zero service.

    So, the winners in this system are the medallion owners. Cabs fares are regulated and not unreasonable. The regulations protect everyone from the worst abuses, and it doesn’t take much effort to guarantee compliance.

    The real inefficiency is the incredible demand that goes unsatisfied. The concept of Uber is to increase supply when needed and compete on quality as well as price.

    There is nothing to prevent cab drivers from using Uber or clone application to hail cabs and to pay for service. Or some sort of craigslist version of Uber. Of oourse there will be conflict between entrenched, highly regulated service providers and new entrants. But it makes more sense for regulated taxis to adopt the efficiency and ease of use of this approach then simply fighting it.

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