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Business Report

Uber’s Bumpy Ride in China

Chinese Uber drivers are making a million trips a day, pleasing consumers but threatening traditional taxi drivers.

Mornings at 5, Mr. Dong, a manager at a livestock farming company in Tianjin, logs in to his Uber account. Before he heads off for work at 7, he can make three to four trips around the city center in his Buick. After he leaves his office at 6 p.m., he continues driving until 9 p.m. On weekend mornings, he’s in such high demand that he can complete as many as 10 trips before noon.

In China, drivers for local firm Didi Kuaidi and Uber both compete with traditional taxi drivers.

“Right now a lot of people are using these services,” says Mr. Dong, 38, who gave only his last name to avoid jeopardizing his full-time job. On top of covering his monthly gas money of about 1,000 yuan ($156), he can earn between 800 yuan ($125) and 1,000 yuan every month by driving for Uber.

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In China, private Uber drivers are making almost a million trips per day, according to the CEO of Uber. Less than two years after its launch here, Uber has developed a fierce rivalry with the homegrown Didi Kuaidi, which reports that its daily private-car requests have tripled to three million since May, and engendered resentment among traditional taxi drivers.

Still, Chinese cities in some ways seem ripe for a technology-driven transportation overhaul. The roads are jammed. According to government figures, there were almost 126 million private vehicles in China at the end of 2014, a 15.5 percent increase from the previous year. The 2014 TomTom Traffic Index shows that a third of the 50 most congested cities in the world are in China. Other commuting options are painful, too—during rush hours a rider in the Beijing subway has to wait for several loaded trains to pass before squeezing in.

The Chinese State Council has identified transportation as one of the traditional industries whose efficiency could be improved by online platforms, but Uber remains in a legal gray area. Its drivers are considered private car operators and do not pay all the registration fees, value-added tax, and income taxes traditional cabbies do. Uber drivers say they often avoid places where there are a lot of police officers, such as airports and train stations. If they are caught, the fines can be as high as 10,000 yuan ($1,564). Recently speculation has increased that online taxi reservations will become a regulated business.

Uber’s not waiting. With the newly set up UberChina, the ride-hailing service plans to expand into 100 Chinese cities, at least half with a population over five million, in the next year. (It currently operates in 11 cities, including Tianjin, with an average population of 14 million.) The company also plans to invest more than seven billion yuan ($1.1 billion) in China in 2015.

But drivers of China’s 1.37 million traditional taxis are already reacting. In May, dozens of cabbies blocked the roads around the Olympic stadium in Tianjin with their cars and lured private-car drivers to the area using ride-hailing apps. As soon as they arrived, the two parties started fighting.

“I’m a bit dispirited,” says Lu Lifang, 48, a traditional taxi driver. “If the government doesn’t regulate the private cars, my profession will disappear sooner or later.” She and her fellow cabbies also complain about dwindling income. Wang Hongyong, 47, says he earns about 150 yuan ($23) less per day now than he did in 2014. “I’m also more tired,” he says. “I don’t rest in between.”

Driving is not a livelihood for most Uber drivers. Most, like Mr. Dong, drive for extra cash. Xing Gao, who works at an insurance company in Tianjin, hasn’t picked up any calls on his Uber app since June because the company has dropped to nearly zero the subsidy it was paying him for each completed trip. In 2014, he had a guaranteed 30 yuan ($5) subsidy per trip. “They want to test the bottom line of drivers,” says Xing, 32, “just to see how much lower they can go before you quit.”

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