Ride-hailers may face app store delisting over illegal drivers in Shanghai

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(Image credit: Didi)

Didi Chuxing has been ordered to pay fines totaling RMB 5.5 million ($780,000) for failing to weed out unqualified drivers on its platform in Shanghai, as authorities in the eastern Chinese city harden their stance on the ride-hailing sector.

Why it matters: Shanghai’s local government has adopted a tougher stance on ride-hailers in recent months after years of relatively uncapped expansion. Regulators warned that more severe punishments could come if they don’t comply, including app removals from online stores and business suspensions.

  • Scrutiny of the local sector intensified after pedestrians were injured in June when an unlicensed  Didi driver attempted to flee from police.

Details: Authorities found that as many as eight out of ten locally registered Didi drivers fail to meet regulatory standards in a series of spot checks last month. Around 15% of Meituan’s ride-hailing drivers were also found to be working illegally. Didi will pay RMB 5.5 million in penalties while Meituan has been fined RMB 1.5 million for leaving illegal drivers on its platform.

  • Regulators have raided 14 ride-hailing companies over compliance issues, accusing them of turning a blind eye to disqualified drivers and faking operations reports.
  • The crackdown has resulted in the number of Didi vehicles in circulation in Shanghai falling by around one-sixth from 120,000 in June to less than 100,000 as of the middle of last month.
  • Didi pledged to remove around one-third of its registered drivers in the city to comply fully.

Context: China’s transport ministry rolled out a new policy in January requiring drivers to obtain special permits for ride-hailing, in addition to their driving licenses.

  • The municipal governments of Beijing, Shanghai, and Tianjin last year strengthened implementation of regulations stating that only people registered in the respective cities could pick up ride-hailing fares there. The move came after the high-profile murders of two female passengers by Didi drivers in 2018.
  • China is home to roughly 31 million cab drivers as of late last year, but only 1% of them, that is about 340,000 drivers, are legally qualified for ride-hailing, reported Chinese media, citing figures from the China Academy of Information and Communication Technology.