China’s worsening taxi problem

While Chinese commuters anxiously wait for taxis, a parking lot in downtown Beijing is packed with vacant taxis whose drivers while the time away by taking naps, reading newspapers, smoking and chatting.
“The roads are too congested. If we get caught in a traffic jam, the fare wouldn’t even be enough to cover the cost of gasoline,” said Zhang, one of 300 cab drivers that regularly park their vehicles at a parking lot during rush hour as a way to dodge heavy traffic. The practice has become more rampant after municipal authorities began penalizing cab drivers who refuse to take their passengers to their destinations.
In many Chinese cities, taxi drivers have been criticized for bad service and refusal to take passengers unless they pay more than the officially established fare.
But taxi drivers insist that hefty franchise fees levied by taxi companies leave them with meager earnings. Zhang said that every month, he and another driver who drive the same vehicle pay a total of CNY9,500 (US$1,529) to a taxi company. Although Zhang works at least 26 days a month, his average monthly net income is only CNY3,000 (US$482.07).
“I would’ve quit this job a long time ago if I didn’t have to pay college tuition for my child,” Zhang said.
In an attempt to regulate the market, the 1990s city governments in China mandated that drivers register with taxi companies and pay monthly vehicle rental and management fees. In many cases, the cabbies end up purchasing the vehicles and paying all operating costs.
Observers consider the franchise mechanism as essentially a monopoly which allows taxi companies to levy excessive fees on the cab drivers, which in turn leads to low driver morale and consequently, poor service.
“The companies sell their franchises after being authorized by the government and the entire process is conducted behind closed doors,” said Yu Hui, a taxi industry researcher at the Chinese Academy of Social Sciences.
“Taxi drivers have no say in how fees are determined. They are upset about companies earning large profits but refusing to share gasoline, repairs and other costs,” added Mao Baohua, a professor at Beijing Jiaotong University.
Experts say that in order to break the monopoly, the government should relax its control over the issuance of taxi licenses. Over the past decade in Beijing, the number of licensed taxis has been limited to 66,600, while the capital’s population has grown from about 13.8 million in 2003 to 20 million. Industry experts believe that the fixed number of taxis fails to meet the surging urban demand for public transport.
The scarcity of licensed taxis has also spawned a booming market for “black cars,” which are often privately owned, so the car owners pay no monthly fees and offer cheaper fares.
This, along with high franchise fees and cut-rate service fares, has resulted in protests and walkouts by cab drivers in several cities across the country.
Yu suggests a temporary solution, which involves raising taxi fares and reducing franchise fees.
“If private car owners can be allowed to compete on equal footing, the taxi companies will have to either lower the franchise fees or prepare for an exodus of cab drivers, who will find operating privately to be more profitable,” Yu said. (January 15, 2013)