After raiding Uber office, Guangzhou authorities set to launch city-backed rival app

Last week, authorities in Guangzhou raided Uber’s local offices and accused it of operating an illegal taxi business.

Small-scale crackdowns are nothing new for Uber, and the company kept its app open for business in the aftermath of the raid. While the bust seemed to come out of nowhere, domestic media outlets have shed some light on its possible origins.

According to Nanfang Daily, Guangzhou’s municipal transportation bureau is preparing to launch its own ride-hailing app, known as Ruyue.

Ruyue is the Guangzhou taxi industry’s unsurprising response to Uber and Didi Kuaidi. In advance of its launch, the city has allocated 2,950 mid-tier and high-end vehicles to serve the app’s customers. To date, four municipal taxi firms have won bids to operate the vehicles. Drivers have proper licensing and registration with municipal bureaus, and are all former cab drivers. Bid winners shoulder the costs of vehicle maintenance and insurance.

Even at this early stage, the startup economics of Ruyue show how any public agency that seeks to compete with private ride-hailing firms is playing a loser’s game. In its current beta phase, Ruyue trips are priced at three-times the cost of a taxi, and at five times the cost of People’s Uber – Uber’s China-specific, “not-for-profit” ride-hailing tier. According to a recruitment ad for Ruyue spotted by Nanfang Daily, drivers must bring in a minimum of RMB 10,000 (about US$1,600) in order to receive a monthly salary of RMB 4,900 (about US$784).

Uber and Didi Kuaidi, the latter of which just launched a competitor to People’s Uber, pays drivers by the ride. They also dole out generous subsidies for each hail.

“We don’t have the huge financing to compete with Uber on pricing and subsidies,” the Nanfang quoted one Ruyue operating company stating.

“Even if we buy mid-tier cars for RMB 200,000 (about US$32,000) each, we’ll spend more than RMB 100 million (about US$16 million) if we buy 50 vehicles,” another operating partner told the paper.

Government-sanctioned ride-hailing apps tend to lag behind their startup counterparts on all fronts. They fail to compete on price and struggle to match up for tech prowess. An app released by Singapore’s Land Transport Authority, for example, didn’t even allow users to book rides.

In China, Uber’s two vulnerabilities are its pace and its passport. Didi Kuaidi, which has a presence in over 300 Chinese cities – far more than Uber – recently released a peer-to-peer ridesharing tier that could compete with the People’s Uber. Uber also the epitomizes the sort of high-profile foreign company that the Chinese government likes to throw tomatoes at. But despite some finger-wagging from state officials, the absence of a nationwide crackdown indicates that domestic authorities have yet to decide on the future of ride-hailing in China.

(Source: Nanfang Daily)

Editing by J.T. Quigley, top image by lobsterstew