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Chinese city scraps franchise fees to break taxi monopoly

2015-09-15 14:30

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Hangzhou, in eastern China's Zhejiang Province, is planning to eliminate taxi franchise fees paid to the government as it seeks to break an oligopoly in the industry. With taxi-hailing apps now challenging a long-established cartel in the country's taxi industry, cab drivers have been feeling the pressure of excessive fees and more competition.

To help drivers earn more money, Hangzhou plans to scrap the government's portion of the management fees retroactively starting from January 1 of this year, according to a draft guideline released Monday.

The new policy will mean an average reduction of 400 yuan (63 U.S. dollars) in fees for taxi drivers, said Lu Xiande, vice chief of the city's traffic management bureau. The government would also refund nearly 100 million yuan collected so far this year.

Currently, taxi drivers in Hangzhou pay up to 8,000 yuan a month to register with one of the city's management companies. Another bold reform in the guideline would allow drivers to purchase and have full ownership and management rights of their vehicles, which previously belonged to companies and were rented by drivers.

The move will reduce interest groups in management, improve drivers' incomes and pave the way for market-oriented reforms, said Zhang Xiaodong, vice chief of the city's road transportation administration.

The city will also establish two state-owned companies to provide management services to individually-owned cabs, according to the guideline. China's taxi management system centers around a select number of companies known for levying exorbitant operation fees, which are blamed for low morale among cab drivers, resulting in poor service.

The emergence of taxi-hailing apps has challenged the current system, allowing customers to access a larger pool of private vehicles that boast better service and lower prices. But the fiercer competition has increased pressure on cab drivers, leading to protests in some cities. In response, several Chinese cities have pledged to reduce franchise fees.

In May, Yiwu City, also in Zhejiang, announced it would go a step further and gradually remove the taxi license quota, which is blamed for worsening the scarcity of cabs and making the oligopoly possible.

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