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Question: In cities like Beijing, official taxis cannot meet demand, so private taxi hailing apps do provide a necessary service... While private car hailing apps do put pressure on traditional taxi services. So what can be done to strike a balance? Also, what can we learn in terms of cab management from other countries? You are right. Major cities in China do not have a taxi service that adjusts to the demand and supply quickly mainly because of the existing rigid price scheme. By allowing the market to find the right price freely, private car taxi service will clear the market much more efficiently. The first tradeoff would be price surges. We have seen prices went up close to ten times during the New Year’s Eve in the States. It is not a bad thing because demand will be met promptly at high prices. However, sometimes it might be politically incorrect to allow price surges during times of disasters. For example, Uber was forced to refund the surcharges gained during the latest terrorist episodes in Australia. Another tradeoff is the shrinking of the existing cab market. Kuadi and Didi, the two largest car-hailing apps in China controlled by Alibaba and Tencent, are now offering premium service that targets medium to high-end passengers by matching passengers with somewhat luxurious cars. It is very much like the Uber’s Black Car service. Beware though, Uber managed to gradually offer a wider spectrum of services, for example, in Korea. It offers ridesharing in some countries with prices lower than traditional cabs. So this new market could overlap with the traditional cab market almost completely. The last tradeoff would be vested interests. The monopoly of state own taxi operators would face huge pressure to break up. Because there is already no room for salary cuts of the taxi drivers—this is a group of hardworking people who work 12-15 hours each shift. There will be strong resistance from existing taxi drivers just like many other cities. Many European countries banned Uber nationwide. But in the longer run, by moving into the new private car taxi service, these workers could make more money. Lastly, we must learn from other countries demanding this new market to provide criminal checks on drivers and proper insurance policies. Back to you. |
