Online chauffeured car hailing platforms' development may slow down in the tough days ahead,as major Chinese cities squeeze out the popular compact vehicles from business.
Mid-size or bigger car models are required for the burgeoning businesses in Beijing, Shanghai,Guangzhou and Shenzhen, according to the regulation drafts released on Oct 8 for solicitingpublic opinions.
Regulations of Beijing, Shanghai and Shenzhen state the vehicle must have a wheelbase longerthan 2.7 meters for petrol cars, or 2.65 meters for new energy vehicles, while Guangzhou's termsdemand a 4.6-meter-long car body.
Industrial experts say the rapidly-developed online chauffeured car hailing businesses are facinga sudden stop, and platform companies need to shift toward heavier assets, and incur highercosts.
Yale Zhang, managing director of Automotive Foresight (Shanghai) Co Ltd, predicted that someof the platform companies might go bankrupt in the near future, as the car-sharing businesses'development would not meet their projections when the larger, more expensive car models arerequired.
He told China Daily: "These companies burned such a large amount of money to attract users,believing the situation to be transitional, but they might not sustain long enough to see their age."
They were expecting another 10 years of speedy development, hoping that fully autonomous,driving vehicles would eventually boost the car sharing further, allowing them to dominate thefuture mobility solution markets, Zhang said.
"Now, their ongoing plans are driving into a dead end. As long as the cars go bigger, the pricewill climb, and the users will decrease. The platform companies might not make as much profit asexpected," he added.
The Beijing Municipal Commission of Transportation claimed both hailed cars and taxies areoperating with much less efficiency than public transport. The city is hoping to increasedevelopment of public transport rather than the more labor-intensive individual transportationsector.
Zheng Yun, executive director of the automotive practice at Roland Berger Strategy Consultants,also sees an end to the online platforms' speedy growth.
He said: "When the policies force the individuals' compact and economy cars out, the companieswill have no way to attract drivers to join the platform with their individual cars."
Industrial data showed that only 2.4 percent of the Didi Chuxing drivers in Shanghai would metthe requirements.
The platforms will have to purchase more mid-size cars to fill the void, so the light-asset platformoperators will head toward heavier assets, said Zheng.
A lawyer at Junhe Law Firm said that the government has been supporting the heavy assetsmodel from the very beginning, as policy makers must have considered the social impact andpassengers' safety, rather than help increase the sector's business.
The lawyer expected a heavy-asset online platform to receive full legitimacy for the company, itsfleets and drivers.
Shenzhou Zhuanche operates its business by renting vehicles from its heavy asset affiliate CarInc, China's largest car rental company by fleet scale.
Shenzhou Zhuanche said the new regulations won't influence its operation, as the businessmodel has always been focused on the passenger safety, which is in line with the governments'philosophy.
Yidao Inc said it will follow the government's regulation, making sure to meet every requirementand get certified with the fleets and drivers accordingly.
Didi Chuxing, China's largest online car hailing platform by volume, said the operation costswould climb, and the users' payments increase to more than double standard taxi fare, accordingto the company's announcement.
Didi Chuxing also called on local governments to nurture a favorable environment for theemerging car sharing business.
President of the Beijing Transportation Research Center Guo Jifu said Beijing's priority is toimprove public transportation, and that the taxi and online car hailing businesses need moderatedevelopment.
The cities are aiming to differentiate the chauffeured car hailing from traditional taxies, not only invehicle size, but also in service and price, local media cited Chen Yanyan, deputy dean of thetraffic school at Beijing University of Technology, as saying.
Chen said online chauffeured car hailing is considered more of a luxury than the cruising taxies,and provides more premium services.