China tells local governments to promote ride-hailing

The Chinese government introduced new regulatory guidelines today that would legalize ride-hailing companies like Uber and homegrown player Didi Chuxing.

In addition, the rules said drivers must have at least three years experience driving to work for a ride-hailing company, cars can not have over seven seats and when 600,000 km is reach they have to be retired from the service or if they are more than 8 years old.

Getty Images/ Larry BusaccaIn his second quarter letter to investors, Dan Loeb, founder of hedge fund Third Point Partners, disclosed that he's investing in China's answer to Uber, Didi Chuxing. The move also legitimizes the battle between Uber and Didi, who are bitter rivals in the fight to become the most popular ride-hailing app in the world's biggest market. "Instead of an arbitrary 8-year service limit after which a auto is mandatorily scrapped, vehicles on our platform may now run until they reach an aggregate mileage of 600,000 km, which is more aligned with a ride-share model with a large number of part-time drivers", the company wrote.

"This is a welcome step in a country that has consistently shown itself to be forward-thinking when it comes to business innovation, " said Uber China's Senior Vice President of Corporate Strategy Zhen Liu.

The new rules are more flexible for drivers working for car-hailing services, said Analysys International's Beijing-based analyst Zhang Xu.

Didi, which said it's setting aside 100 million yuan to integrate online ride-hailing and taxi services through a strategic partnership of regulators, taxi companies and drivers, said the rules are a "positive first step".

"Soon we will initiate the application for the appropriate licenses".

In a blogpost the company posted, however, Liu makes it clear that though the company is optimistic, the details of local regulations are still up for debate.

Drivers at both services as well as others such as Yidao Yongche, which is majority owned by LeEco the electronics company, have operated in gray areas with police detaining drivers and impounding their vehicles on what has been called an inconsistent basis. Didi raised $7.3 billion in its latest round of funding in June and Uber received almost $2 billion from Chinese backers in January.

  • Wendy Palmer