Resentment among People's Uber drivers in Shanghai grows
Resentment said to be growing among People’s Uber drivers in Shanghai, many of whom are dissatisfied with the dwindling incentives or subsidies offered the Uber parent company. People’s Uber, which was launched last October, is a nonprofit ride-sharing service that pairs car owners with passengers. “The current subsidy rate for regular hours on weekdays is 1.6 times of the fare. That’s too low,” said one driver in Shanghai, “I will quit driving for Uber if it drops again...It will not be worth my time anymore.”
No smooth ride for Uber in China Updated: 2015-07-25 04:56 (China Daily USA)

Car-sharing services are becoming more popular in a super city of 24 million people like Shanghai. Gao Erqiang / china daily

Resentment is brewing among the People’s Uber drivers in Shanghai, many of whom are dissatisfied with the dwindling incentives or subsidies offered by the controversial San Francisco-based company.

People’s Uber, which was launched last October, is a nonprofit ride-sharing service that pairs car owners with passengers.

“The current subsidy rate for regular hours on weekdays is 1.6 times of the fare. That’s too low,” said one driver in Shanghai, who requested to be identified under the alias Li Feng.

“I will quit driving for Uber if it drops again,” Li added. “It will not be worth my time anymore.”

The situation seems to be no different in Hangzhou, a city in East China’s Zhejiang province, as Jiang Lin shares the same gripe. She claimed that Uber offered top-ups of more than five times the fare in February and March when the incentives in the city peaked. She once received 55 yuan ($8.85) from the company on top of a short 10-yuan trip.

She also recalled making 800 yuan from 16 trips in an hour during that period. She was ecstatic with the result but the situation quickly changed. “The number of drivers skyrocketed the following week. I could only get one booking in one hour in the same place,” she said.

Uber, which began its trial operations in Shanghai in August 2013, was open about the fact that they are indeed dishing out lesser incentives to drivers. Yin Jie, a senior associate at Uber China’s communication department, attributed this to the company’s growing presence in the Chinese market and suggested that the increased demand for Uber cars can compensate for the reduced subsidies.

“As our business in China matures, drivers are beginning to earn more per hour from the fares and this is why we have started to reduce driver incentives,” Yin said.

It is a rationale that Uber has consistently stuck by — when they made price or incentive cuts in other countries, Uber’s stand was that their complex pricing system, which includes the introduction of surge pricing at certain hours, ensures that drivers don’t actually make a loss.

According to Yin, an Uber passenger in Shanghai only has to wait an average of 6 minutes for a ride. Uber users in Beijing and Hangzhou wait just 5 and 3 minutes respectively.

Uber declined to comment if there has been a rise in driver sign-ups, instead saying that their “business has been growing at a very healthy rate despite a reduction in subsidies”.

Reasons for Uber’s growth

It comes as no surprise that Uber’s popularity is growing in cities like Shanghai. Though the current subsidies may not be as attractive as before, People’s Uber drivers can still make a considerable amount of money. According to the Shanghai Academy of Social Sciences, the average monthly wage in Shanghai last year was 5,144 yuan. In his first month as a People’s Uber driver, Li had managed to earn 15,000 yuan.

Also, the subsidy rates often change in Shanghai. Li is currently aiming to complete at least 50 trips a week as this would earn him an inflated incentive rate of 2.9 times the fare. If he manages to hit the quota, he said he would take the afternoon off to have coffee or watch a movie with his fellow Uber drivers. It is an attractive perk that a fulltime job does not offer.

For passengers, there is little reason not to use People’s Uber. In Shanghai, it can be more difficult to get a regular taxi because there are only about 50,000 of them in a city of about 24 million people. Wang Xiaolei, an assistant professor at the Sino-US Global Logistics Institute of Shanghai in Jiao Tong University, said during a public forum in June that Shanghai’s notorious traffic congestion issues have worsened the taxi availability problem — apparently taxi drivers would rather wait hours in queue at Pudong International Airport than pick passengers in the downtown areas.

Uber effectively addresses this supply and demand problem. Also, Uber drivers are usually more courteous and are not as recklessly as taxi drivers. Moreover, People’s Uber is generally cheaper and more comfortable than a taxi ride.

For others, like Song Yong, who has almost completely given up taking a taxi, riding in an Uber is more about meeting people and exploring business opportunities. A specialist in after-market maintenance of automobiles, Song said that he uses People’s Uber as a platform to conduct surveys for his company and to negotiate deals with the drivers he meets.

Mao Shaoqing, who has eight ride-sharing apps in his smart phone, uses Uber almost exclusively. He is impressed by Uber’s success in a tough Chinese market where many other foreign companies have failed and believes he should support the US company’s ambitions. Uber has been known to hold creative marketing campaigns where roses and snacks are delivered to customers. Earlier this year, Uber offered a helicopter rental service in Shanghai.

“I think I should support it. Many foreign companies like Best Buy and Media Markt have encountered setbacks here. Some have even pulled out of the Chinese market. It’s amazing to see that Uber has done well in China so far. Its products are really great,” said Mao.

In a further testament to Uber’s growth, Uber CEO Travis Kalanick told investors in an email that the company is making nearly 1 million trips daily in China. Kalanick also mentioned in the same letter that the company plans to expand into 50 more Chinese cities within the next year. According to Chinese business magazine Caixin, Uber is expected to raise several billion dollars in its current fund-raising campaign in China.

Key challenges for Uber

While Uber may be aggressively expanding in China, a recent survey by internet research institution CNIT shows that the US company commands only 11.5 percent of the market share. Didi Kuaidi, Uber’s biggest rival in China, is the leader with 80.2 percent. It is made up of two taxi-hailing firms, Didi Dache and Kuaidi Dache.

Jiang no longer drives for Uber. The 23-year-old quit about a month ago when she realized that the current subsidies aren’t enough to cover her fuel and maintenance expenses for her Audi Q5. She has since switched to Didi Kuaidi, saying she prefers the Chinese ride-sharing apps because they allow her to decide whether to pick up a passenger based on her current destination. Didi Kuaidi also doles out attractive bonuses and subsidies, she added.

Another challenge for ride-sharing services such as People’s Uber and Didi Kuaidi is their legality. In the eyes of the authorities, private car owners are breaking the law if they earn income from offering transportation services without a taxi license.

Likewise, the Ministry of Transport in China has not given the nod to such private car services. Since November 2014, Shanghai authorities have investigated more than 180 private car owners for using car-sharing apps to shuttle passengers. Uber’s Guangzhou and Chengdu offices were also investigated by Chinese authorities in May, though the app has yet to be officially banned in China.

Shanghai police launched another clampdown on ride-sharing apps across the city on the night of July 17. Fifteen drivers were under investigation for running illegal car services using online apps.

According to local website thepaper.cn, these drivers will be fined up to 10,000 yuan and have their driving licenses suspended for three to six months if they are found guilty. The companies of these ride-sharing apps will also be fined 100,000 yuan each.

“New things and new technology tend to be questioned in the beginning. But as time passes by, the questions will be gone,” said Yin, adding that Uber also runs other services — UberBlack, UberXL, UberX — with legitimate local car rental companies.

In what could be a further blow to Uber’s ambitions in China, Shanghai’s transport department on June 1 launched a taxi information platform in collaboration with Didi Kuaidi’s taxi-hailing service. This is the first official collaboration between a ride-sharing company and authorities in China, and according to the department’s website, further collaboration on ride-sharing services may follow.