* Shanghai govt bans rush hour use of taxi booking apps
* Tencent, Alibaba battling for lead in taxi app space
* Market-driven apps split opinion in changing China
SHANGHAI, Feb 27 The Shanghai city government
has followed Beijing's lead by restricting the use of
increasingly popular taxi booking apps, putting investment into
the technology by local and foreign companies at risk.
New rules ban the use of booking apps by cab drivers during
rush hour periods and ban their use entirely by private vehicles
licensed for hire, according to a statement released late on
Wednesday by the Shanghai Municipal Transport and Port
The fast-growing sector attracted over $43 million in
investment over the last two years, according to internet data
firm iResearch, from the likes of tech giants Tencent Holdings
Ltd and IPO-bound Alibaba Group Holding Ltd, as well
as U.S. venture capital firm Sequoia Capital.
The market is dominated by Didi Taxi and Kuaidi Taxi, backed
by Tencent and Alibaba respectively, which together held almost
90 percent of the market by daily taxi app orders last year,
according to iResearch.
Tencent and Alibaba have been locked in a battle to attract
customers, offering generous rebates to drivers and riders to
use their apps and payments systems.
Taxi booking apps, which allow users to "bid" for cabs by
adding an additional flat fare, essentially allow customers and
drivers to cooperate to break through government price controls
on fares and negotiate a market price for transportation.
Use of the apps has divided opinion in China. Some cab
drivers told Reuters they now would not go without them, while
others complained the apps created an unequal playing field for
both drivers and passengers.
Shanghai's stance is likely to concern industry insiders, as
China's commercial centre and most populous city was widely
viewed as a good seeding ground for the market-driven business.
SEARCHING FOR FARES
There have also been complaints that people are having
increasing difficulty hailing cabs on the street, as many
drivers refuse to pick up customers paying normal fares.
Instead taxi drivers cruise the streets with their eye on a
collection of cell phones mounted on their dashboards running
different apps, all searching for fare bids.
Under the new rules, Shanghai's cabbies will not be allowed
to use the apps while driving, and can be fined for refusing to
pick up ordinary-fare passengers.
"We encourage users and drivers to comply with relevant laws
and regulations," said an Alibaba spokeswoman in emailed
comments to Reuters, adding Alipay users can still pay for their
cab rides with more than 8,000 taxi drivers in Shanghai.
Kuaidi Taxi did not respond to requests for comment. The
firm's chief operating officer told Reuters this month that the
authorities broadly supported the taxi app business.
Tencent has also developed a function in its popular WeChat
messaging system that allows customers to book and pay for cabs
using its e-payment mechanism, and refunds a portion of the fare
to the user. Tencent did not immediately respond to requests for
comment for this article.
Analysts say the payment system for the Didi app was
developed in part to help Tencent compete with rival e-commerce
giant Alibaba for a share of the booming online payment market,
currently dominated by Alibaba's Alipay.
The new regulations could also hit services like U.S.-based
Uber, which recently launched in Shanghai and other Chinese
cities, and allows passengers to book private cars.
Uber declined to comment for this article.