No Free Ride for App-Hailing Drivers

Last month's Ministry of Transportation ban on ride-hailing apps that link users with private drivers has stirred up many speculations on the outlook for companies like Kuaidi Dache, Didi Dache, Yongche and foreign contender Uber, all of which offer services that directly or indirectly facilitate just such a use. 

The ban has had less than catastrophic effects for these companies but that doesn't mean they're getting an easy ride. 

This article takes a look at some of the issues facing drivers, regarding the taxi industry and ride-hailing apps.

FRANTIC FRANCHISE FEES

If you're an old-school taxi driver, you're looking at franchise fees and heavy competition from a new wave of road hogs who get paid more than you, yet have big, big companies behind them to drive down their consumer costs.

Franchise fees (份子钱), are hefty monthly license fees that certified taxi companies require their drivers to pay to work for the company (these aren't the only fees, either, as in the case of the Jinan driver who only received only half of his RMB 40,000 deposit for a 6-year contract - Chinese source). Franchise fees can amount to more than half of a driver's monthly income.

In Nanjing, a taxi driver might make RMB 8,000 per month and have to pay a RMB 4,200 franchise fee. Coupled with shouldering the cost of gas and road tolls on their own, a cabbie's monthly income after all deductions can be pretty paltry.

DAS KAPITAL ÜBER ALLES

Many taxi drivers have complained that drivers for Uber, and some for Kuaidi and Didi, are unfairly off the hook as they aren't subject to the same prohibitive charges. Uber has joined with a local partner that provides licensed cars and drivers, but Uber does not operate as a taxi company in China. 

Instead of expensive franchise fees, Uber drivers pay $40 US per month to use the app. That's a sweet deal, although burning rubber for Uber means giving up a 20% slice of every fare to the company (Chinese source).

With a $40 billion valuation, Uber is yet leaving its drivers somewhat by the wayside: Uber isn't providing insurance benefits at this point.

Kuaidi, for their part, have stated they never charged licensing fees, generating income from a marginally better 10-15% cut of each fare.

The other issue with drivers is how they are taking issue with the issue themselves. Last month Taxi drivers rioted in Nanjing against franchise fees in what Quartz has identified as the largest transportation sector protests on record.

Drivers caught between harsh working conditions and increased competition may continue to physically militate against their perceived unfair treatment. Widespread strikes and disruptions could mean gridlock for everybody.