Taxi drivers in ten Chinese cities have gone on strike to protest the arrival of ridesharing services such as Uber, the San Francisco based company valued at $40 billion, in the country. Traditional drivers claim the high franchise fees imposed by the state-run taxi industry inhibit their ability to compete with the cab-hailing services that have sprouted up in cities like Beijing and Shanghai.
The taxi industry in China is heavily regulated by state and local governments. Taxi licenses in urban China are controlled by state-run companies and require significant investment to be obtained. The number of licenses available in the country has remained relatively stagnant over the past two decades, driving the price as high as 1.4 million yuan ($225,861) per license in some areas. Private car operators that drive for Uber and similar services do not face this barrier to market entry and instead are only required to pay 20 percent of their earnings back their employer. The ability of this business model to undermine the structure of the traditional industry has incited protests from taxi drivers and has prompted legal action in the city of Beijing.
The Beijing Transport Committee deemed Uber and other private car-hailing services illegal in a statement made on January 28, 2015. Drivers working for “black cab” companies like Uber are subject to a 20,000-yuan ($3,200) fine if caught. For perspective, the average monthly income of taxi drivers in the city of Shengyan is roughly 5,000 yuan ($806).
Uber continues to operate in Beijing despite the legal sanctions, and the company’s future in China remains unclear.