Uber the Top? One US Company is Trying to Take China’s Taxi Industry by Storm

Uber the Top? One US Company is Trying to Take China’s Taxi Industry by Storm
Dec 29, 2014 By Alex Schofield , eChinacities.com

Uber is a company that has constantly been in the news in 2014 due to its aggressive expansion, controversial business practices and unpopularity with the Taxicab industry. For those unfamiliar with Uber, it is a company that makes a smartphone app from which passengers can find a private car service. Available vehicles are shown on a map via their GPS systems and the current price of each class of vehicle is shown, as well as an approximate amount of time that it will take the driver to reach you. You can also get an estimate of how much your fare is likely to be. You pay through either Visa, Mastercard or Alipay, which is linked to the app, meaning no money actually changes hands with the driver, and you are then e-mailed a receipt. The drivers are all self-employed and Uber simply takes a cut of what they earn.

Uber the Top? One US Company is Trying to Take China’s Taxi Industry by Storm
Photo: bfishadow

Uber has courted a significant amount of controversy in 2014 even leading to protests in London, Paris and India against their presence. The taxi industry claims that Uber is not subject to the same regulations as the taxi industry, and also benefits from unfair tax arrangements as it can move its profits around various subsidiaries. Uber claims that the taxi industry has enjoyed a monopoly for far too long and it is merely meeting customer demand for more competition in the marketplace. The San Francisco based company is now operating in 53 countries and it’s most recent investment round saw the company valued at US$40 billion.

Uber in China

In China Uber operates in eight cities: Beijing, Shanghai, Guangzhou, Shenzhen, Wuhan, Tianjin, Hangzhou and Chengdu as well as Hong Kong. To use the service, you must link a Visa, Mastercard or Alipay account to a profile, which also includes your photo and telephone number. You then can order cars through the app. Prices vary according to city, type of vehicle ordered and also demand for the service at the time of ordering.

In Shenzhen where I live there are two services offered: UberX and Uber Black. The difference is basically that Uber Black offers a nicer Audi A6 or BMW car, as opposed to the Toyotas, Buicks and Hondas that arrive when you order an UberX. The prices are as follows in Shenzhen, obviously other cities will be different:

UberX:
Base Fare: 8 RMB (doesn’t include any distance)
Time: 0.25 RMB/min (this is for all the time you are in the car, not just waiting time when the vehicle is at a halt)
Distance: 1.60 RMB/KM
Minimum Charge: 20 RMB

Uber Black:
Base Fare: 17 RMB
Time: 0.85 RMB/min
Distance: 2.73 RMB/KM
Minimum Charge: 24 RMB

Uber vs Taxi

The main reasons to use Uber are that you get to travel in a nicer car and that UberX can be cheaper than a regular taxi, especially over long distances. It can also be especially useful in places where the taxi queue is ridiculous. I once evaded an hour long queue at the Shenzhen/Hong Kong border crossing by hailing the Uber that was conveniently two minutes away. You can certainly get used to travelling in their cars, even their lowest class has nice Toyotas and Buicks that are much better than the battered Volkswagons that constitute most of Shenzhen’s taxis, complete with a driver who smokes 40 Zhongnanhai a day.

If there is an occasion, or you want to impress somebody, going somewhere in an Audi or BMW for a reasonable price is a good option and I suspect this is their main target in the Chinese market: people who want to travel in nice vehicles as a means of gaining face. Uber also sends out regular e-mails with discounts and promotions, which can sometimes even entail free rides. Their pricing is competitive, and the low cost per KM of UberX can mean that long rides are actually cheaper than a regular taxi.

Just take a taxi

The main issues with using Uber are language barrier, their payment options and surge pricing.

When you order a car through the Uber app, the first thing that’ll happen is that the driver will call you and ask you where you are, even though he/she can see your location on his GPS. If your Mandarin speaking ability is not particularly good or you don’t know the geography of the place you’re in very well, this is going to present a significant problem as the driver will have difficulty finding you.

Uber currently accepts Visa, Mastercard and Alipay as payment options in China. Many would agree that this seems like the biggest issue preventing Uber from making a big breakthrough in the Chinese market as most people in China have Unionpay cards and Alipay is only available in the Chinese version of the app. I for example, have to pay for Uber rides using my UK account, which isn’t ideal for me and I suspect this is also the case for many other people.

Although not currently a big issue in China where demand is currently low, Uber’s “surge pricing” policy has not been particularly popular in many places. When demand for cars is high, Uber will increase prices, ostensibly to encourage more drivers to hit the road in order to earn more money. This gained notoriety during a snowstorm in New York last year when prices for an Uber hit $US35 per mile, with a minimum charge of $175. In Sydney during the recent hostage situation in a city café, Uber was heavily criticized for increasing prices to four times the normal rate in what many labelled as profiteering.

Will Uber do well in China?

Uber certainly faces stiff competition in this space, not just in the form of the taxi industry but also in competitors such as Didi Dache and Yongche. A recent announcement of a partnership with Baidu has attracted much attention and Uber is certainly optimistic.
My own opinion is that Uber will do Ok, but certainly won’t perform to levels it has in other countries such as USA, UK & Australia. Uber cannot undercut the Taxi industry in China in terms of price the way it has done in many other countries, and I feel that in countries like China old habits are hard to break and people want to hail a taxi on the street and pay with cash. In many Western countries calling a private hire vehicle was already common, so this isn’t much different, and bank card usage is also more prevalent whereas China is an overwhelmingly cash society. The difficulty in actually paying for an Uber ride in a country where Visa & Mastercard are uncommon is a big obstacle, Uber must form partnerships with Chinese payment companies to be successful.

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Keywords: Uber in China China’s taxi industry

8 Comments

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kuntmans

Nice marketing piece for uber. I wonder how much of their marketing budget is spent on 'soft' advertising.

Dec 29, 2014 21:14 Report Abuse

bill8899

They're not allowed to advertise?

Dec 30, 2014 01:25 Report Abuse

kuntmans

Who said anything about advertisements? That would be perfectly fine if that's what it was. If it's a covert marketing ploy dressed up as a 'neutral' journalistic piece that is something entirely different as it entirely dishonest.

Jan 04, 2015 10:13 Report Abuse

bill8899

Oh I see, mincing words. So they're not allowed to market? I prefer informative marketing to advertisements myself. Just tell me what you do, I can decide if it's useful. Kinda like this marketing piece. I guess you prefer flyers at the supermarket? With 10% off something you don't want?

Jan 04, 2015 22:09 Report Abuse

Mateusz

Don't forget how Uber will be denounced as a harmful foreign influence that hurts the feelings of the Chinese people.

Dec 29, 2014 21:57 Report Abuse

Hotwater

There is already a Chinese version called Kuaidi ONE

Dec 30, 2014 18:45 Report Abuse

bill8899

Bingo.

Jan 03, 2015 19:38 Report Abuse

bill8899

Uber interesting.

Dec 29, 2014 17:56 Report Abuse