Regulators released an update to rules governing the ride-hailing industry on Tuesday, including doing away with additional requirements for ride-hailing companies with foreign investment, and analysts say more regulation is to come.
Why it matters: The nullification of this requirement brings ride hailing in line with the Foreign Investment Law, which came into effect this year.
- Domestic companies have long enjoyed home advantages in ride hailing, creating enough of a competitive edge to sow doubt as to whether the change will lead to material change. “This announcement will not have a huge impact on industry, since we’ve already entered the second half of the game and there are already many players,” Xu Huxiong, principal at strategy firm Roland Berger, explained to TechNode.
Details: Regulators struck out a clause in regulations governing ride-hailing which required foreign-invested companies to contend with more red tape—such as additional permits and approvals—than domestic peers.
- The regulations (in Chinese), originally released in 2016, legitimized ride-hailing and also set standards for companies.
- State Council had already cut red tape for road transport service projects with foreign investment.
Context: Regulations for ride-hailing continue to lag behind industry realities. The furor around Didi’s safety features following a series of incidents enabled by the ride-hailing platform, for example, highlight just one aspect of the challenge in regulating an industry with many small players, sometimes dozens in a single region.
- The speed at which the industry has developed leaves regulators struggling to keep up. “Governance of ride-hailing will become more detailed,” said Xu. There is already an alliance that consults with ride-hailing companies on regulations that will affect industry.
- Out of all of regulator priorities, “Safety is most discussed,” Xu said. That will mean operations become more standardized, vehicles may have cameras, and there will be more rules for different aspects of ride-hailing whether that be luxury cabs, or carpooling.
- Didi, one of the biggest players in ride-hailing, is already cooperating with local police in Guangdong to transfer evidence. It has been scrupulously adhering to requests, with some 98% of transfers (in Chinese) completed within 10 minutes.
- Whether platforms should be able to use location data to push tailored ads to users is also under debate, said Xu.