When China’s largest cab-hailing app company Didi Chuxing announced at the end of July a merger with Uber after a bitter battle for dominance, it was unclear what, exactly, would become of Uber’s China operations. Essentially, Uber sold its China operations to Didi, leaving Uber free to focus on less challenging markets ahead of a widely expected IPO.
In August, Didi said that the two companies would remain independent. More recently, Didi has said that “customer facing operations” will remain independent. Over the next two weeks, Uber users will have to download the new app.
This new app is in Mandarin only, is not compatible with Uber international, uses the same map software as Didi, uses the same drivers as Didi, and does not work with foreign credit cards.
So…Uber is dead, though the company did announce an “international edition” planned for next year. Given Didi’s international aspirations, it’s unclear whether this would be “Uber” as such. As for the present, there have been reports of difficulties using the app and of price hikes, which commentators are attributing to the fact there is a monopoly, compared to in the past when there were two companies offering generous subsidies in order to undercut each other.
Inside China, Didi’s future is even more difficult to discern. While it has become the undisputed number one in the car-hailing app market (there are still much smaller competitors like Yidao Yongche), there were sweeping new laws introduced just before the merger.
The devil is most certainly in the details. The new laws specify requirements for drivers and ban the large subsidies that characterized the Uber-Didi battle, but mostly, they palm off the heavy duty rule-making to local governments to do as they see fit.
And earlier this month, a host of local governments did just that. The big problem relates to migrant workers—the people who already find it tough to live in big cities because they lack a hukou (household registration, basically citizenship of a city) for that area. The rules issues by Beijing, Shanghai and Shenzhen all prevent migrant workers from being drivers, presumably in an effort to ensure drivers don’t have criminal backgrounds.
Critics say it is an effort to assist cab companies, who provide a fair chunk of revenue to local governments, and say that this is effectively regulating car-hailing apps to the point where they are basically just cab companies that use apps instead of part of the sharing economy.
The Wall Street Journal cited Didi as saying that just 2.6 percent of its Shanghai drivers were local residents. This rule would effectively lock migrant workers out of one of the more stable work opportunities for the upwardly mobile. Unsurprisingly, Didi loudly voiced its objections, in a rare case of the company being openly critical of government regulation.
It is important to note however, that these are draft regulations. The final version may end up being less harsh if Didi persuades the authorities that these requirements are too onerous. On the other hand, there have been strikes by cab drivers specifically complaining of the savage competition from car-hailing apps, and effectively turning Didi into a big cab company would make things far easier from a regulatory standpoint.
One thing is certain: while the war between Didi and Uber is well and truly over in China, the struggle to regulate the winner is ongoing. And with Didi gearing up to go international, the company still has its work cut out for it.
Source: This article originally appeared in “The World of Chinese” magazine.