Taxi firm Uber geared up for mainland China click

PUBLISHED : Saturday, 09 August, 2014, 4:10am
UPDATED : Saturday, 09 August, 2014, 8:11am

Mobile app taxi hire firm Uber is targeting every mainland city with more than two million people as part of a wider regional expansion plan.

Co-founder and chief executive Travis Kalanick says the company, which lets customers hail taxis through a one-click phone application, will focus first on Asia’s well-heeled passengers by offering cars with free Wi-Fi.

Only later might the company roll out a mass market product.

It is the latter service, UberX, that has the potential to excite consumers – and taxi unions – as it goes wheel to wheel with established taxi companies on price and service.

For now, Kalanick wants to learn the rules of the road.

In each region it operates in, Uber has to navigate licensing and car insurance laws. In California, anyone with a car can sign up to be an Uber driver. In most jurisdictions, only licensed limousine or taxis drivers can carry fee-paying passengers.

Kalanick says he complies with Hong Kong regulations and only uses licensed limousine drivers to shuttle around customers. On the mainland, it is a different story. There, city governments have tried to limit the use of app-based taxi firms following complaints from roadside hailers that there were no taxis available to pick them up. Kalanick says he follows his rivals’ lead and just drives around, or rather over, the new rules.

How do you stand out from your rivals?

The most tangible is that we were the first. If we are their inspiration, then that means we are two or three steps ahead. Is there any other way you can push a button and a car turns up in five minutes? It is not for everyone but it is new and it is interesting. Imagine the only way you could eat is to go to McDonald’s. And we come along and say we have this new invention; it is called a restaurant. And some folks are saying, “Why do you need a restaurant when you have McDonald’s everywhere?” And we say, “Sometimes you want better food and a better ambience.” People have got so used to the one option that their imaginations have almost been shut off like they are not allowed to have anything else. That is why we see such massive growth in the cities we go into. People do want a choice.

Is there a danger to your model as it relies on disputed laws – like those on private cars carrying fee-paying passengers – and you have upset a number of powerful unions?

Most of those laws are about protecting the existing industry, not providing consumers with value. We let the people speak on our behalf. If they love this option, why should they not have a nice car take them around the city? In Seoul, chauffeured service is legal unless the passenger is Korean. Why do you think that law exists? The taxi industry has convinced people to make that law to protect the industry – protect it from progress and from providing value to anyone other than itself. 

Do you use lobbyists to get laws changed?

We are always trying to bring progress to these cities and we talk to city officials and regulators to show them what we bring to the table.

In Hong Kong, how will you operate?

We work with licensed limousine companies. We will take a look at the regulations and see if we can offer a lower-cost option. Wouldn’t it be amazing if they say “no, you can’t offer a lower-cost service”? That is what many of these laws are designed to do, to protect people from a cheaper option.

Have you taken a look at who owns the taxi licences in Hong Kong? It is a list of wealthy and influential investors.

No I haven’t. The folks who run or own the incumbent industry are against progress. In the cities that we are in, they traditionally use (anti-competitive) laws to keep competition out. What we are seeing with our technology and growth is that consumers in these cities are not okay with that.

How did the ban in Beijing and Shanghai on the use of taxi-booking apps during rush hour and private drivers from picking up passengers affect Uber?

In some cities, there are conflicting laws. Sometimes new rules are proposed but do not get enforced. In Shanghai, you can open up Didi or Kuaidi, and you can get a taxi at 4pm.

And the same for you?


In the mainland, you do not have first mover advantage, so how do you catch up?

You provide a service that is different. We are creating a new transport system. It is higher quality. It is also mass market, but a little more expensive than a taxi, by about 20 to 30 per cent. We work with rental car companies that have commercial licences. They are private hires.

Regarding your business tactics, one of your competitors in the US complained you had made fake taxi orders, that is calling taxis and then cancelling en masse.

En masse is a mischaracterisation. We are aggressive about getting more drivers on the system but the claims we were affecting their network are a mischaracterisation.

The business on the mainland is pretty cutthroat. What are the tactics being used? 

We have not seen aggressive tactics that are different from anywhere else. The stuff that is going on between Didi and Kuaidi is another thing. There are massive subsidies – the passenger gets 15 yuan off for the ride and the driver gets paid 15 yuan more. It is a taxi war going on. The margins are negative.