A set of temporary measures aimed at regulating car-hire services may seriously affect the sources of cars and drivers for chauffeur service platforms and cause the segment to shrink.
Increased regulations will hurt China's online car hire segment
The “Interim Measures for the Management of Online Car-Hire Services”, expected to be released next week, seek to professionalize the online chauffeur service segment. The rules are similar to those for the traditional taxi industry albeit with fewer elements related to online and sharing economy model.
The regulations stipulate that vehicles for hire must be registered as taxis, and private vehicles on chauffeur service platforms must be registered as commercial vehicles with the Department of Motor Vehicles. The life span of small and mini taxis usage is limited to eight years.
All online car hire drivers are also required by the regulations to make license applications and pass a test before working for road transportation businesses.
One analyst says licensure for chauffeurs will lift the segment’s entry threshold and increase time and cost for drivers. Forcing car owners to write off a car after the eight-year usage limit for commercial vehicles will be a major blow to part-time chauffeurs and cause many of them to pull out of service.
The measures also empower each municipal government to set limits on the number of chauffeur service vehicles operating in their city. Municipal traffic authorities will also be authorized to approve vehicles for service and issue Road Transportation Licenses. Chauffeur service platforms will also have to apply to operate separately with relevant authorities in individual administrative region from now on.
Besides obtaining an operating license, online car hire businesses also have to ensure they satisfy other regulations such as the server is located in the PRC and those with telecom operations are subject to State Communications Department regulations.(Translation by David)
