Didi grapples with Chinese cities’ draft laws

Didi has suffered a bolt from the blue, as Beijing, Shanghai, and Shenzhen each rolled out specific regulations for the car-hailing business on Saturday. The rules are harsh, to say the least, and have brought the ride-hailing behemoth to its knees, arguing for possible remedy from the authorities.

The newly published draft interpretations from the three largest cities — all with tremendous migrant populations — have stipulated that drivers must have local Hukou, or family register. This is a heavy blow for Didi, as the regulation eliminates more than half of the drivers in Beijing and Shenzhen and dispels an overwhelming majority of Shanghai drivers from the platform.

The draft laws from these cities also raised the bar for cars in the business. Didi has stated that the higher standards would disqualify more than four out of five existing vehicles.

Artificially holding down supply would “more than double prices,” and the waiting time for rides would increase from the current average of five minutes to a whopping 15 minutes, warned Didi.

It also warned of the adverse effects of having droves of unemployed drivers, which could pose a “mass risk” and become a “social unstable factor.” Naturally, in a state of desperation, the company pulled out its trump cards — “innovation” and the “sharing economy,” both espoused by the premier himself, and Didi predicted that these measures would brutally crush the buds of the sharing economy.

“Didi sincerely urges local governments and authors to give citizens with and without local Hukou equal employment rights. We should not let citizens lose heart and passion in innovation and entrepreneurship,” the company said after the new regulations rolled out.

The rigid Hukou specification is perhaps the most fatal blow. “Of the 410,000 registered drivers in Shanghai, only 10,000 have a Shanghai Hukou,” Didi said in a statement. However, these figures may be exaggerated for Didi’s own convenience, as it fans its victimized image and threatens more severe consequences. Only 30 percent of Shanghai drivers were nonlocal, according to Didi’s “Mobile Transportation Employment Promoting Report” published last month, in which the company congratulated itself on its ability to attract local drivers who are better acquainted with roads.

More than 65 percent of drivers in Shenzhen and more than 50 percent of those from Beijing do not possess a local Hukou, the report found.

Once the guidelines, which are still in an opinion solicitation phase, kick in, cars on the platform will need to be under two years old, with a wheelbase longer than 2700mm and an engine capacity of more than 17.25L — specs that mid- to high-end cars are more likely to meet. On the bright side, this means there will be fewer creaky, manual-windowed surprises pulling up when you hail a ride.

Unlike the desolate future which Didi fears, with all but luxury sedans plucked from the platform, Technode has found that it’s possible to get qualifying Chinese models that cost as little as 80 thousand Renminbi.

Just how much leeway is there to revise these local draft regulations before they are set in stone? That remains a question. The company has proved that it carries a lot of clout — some of its executives, like Zhang Bei, come straight from the government bureau of transportation. And Didi’s outspoken objections to the national draft for car-hailing led to an eventual version that largely favored the company. Didi’s recent buyout of Uber China has been (so far) exempt from anti-monopoly investigations, attesting to its solid relationship with the authorities.

But these local interpretations have clearly come as a shock, or at least a case of  failed lobbying on the local level. Will the law be in Didi’s favor in China’s mega-cities? Though Xinhua has published a commentary proposing that draft laws should leave “windows for revision” and emphasizes that even “provisional guidelines” are subject to modifications, the window of opportunity this time is short. Suggestions and objections to the draft must be made within one month, while Beijing left merely a week for rants and complaints. Didi had better start pulling some strings or be prepared to hold its peace — at least for the time being.

This story originally appeared on TechNode. Copyright 2016