China has given the green light to online ride-hailing services, issuing guidelines that establish a long-awaited framework for the booming industry and remove uncertainty for firms such as Didi Chuxing and U.S. rival Uber Technologies Inc [UBER.UL].
The rules outlined on Thursday take effect on Nov. 1. They were immediately welcomed by Uber and Didi, which have invested billions of dollars to attract riders with discounts while operating in a legal gray area in most of China.
“In managing online ride hailing, on the one hand we want to promote its development, on the other hand we want to regulate its behaviour,” said Vice Minister of Transportation Liu Xiaoming.
The rules require drivers have a minimum of three years’ experience behind the wheel and pass a crime check. They also stipulate that cars used for rides must not be more than eight years old or have more than 600,000 km on the odometer.
China has been soliciting feedback on draft regulations issued in October.
Those issued on Thursday left some of the regulatory decision-making to local authorities.
For instance, cities where ride-hailing services operate can set minimum and maximum prices to control fares, Liu said. Local authorities would also be able to place additional requirements on vehicles, for example allowing only certain models.
The ride-hailing sector has been an arena of intense competition between Uber, Didi and a raft of smaller rivals.
While globally Uber leads the sector, Didi claims 87 percent of the Chinese market for private ride-hailing.
“We welcome the new regulations, which send a clear message of support for ridesharing and the benefits that it offers riders, drivers, and cities,” Zhen Liu, senior vice president of corporate strategy with Uber China, said in a statement.
“This is a welcome step ... and we look forward to working with policymakers around the country to put these regulations into practice.”
Didi also welcomed the rules, saying they reflected an open mind on the part of the government with regard to car-hailing and the sharing economy.
“DiDi will make an earnest effort to comply with the new rules and adopt its corresponding standards. Soon we will initiate the application for the appropriate licenses,” it said in an open letter.
The rivals have raised massive sums to compete in China. Didi raised $7.3 billion in its latest round of funding in June and Uber received nearly $2 billion from Chinese backers in January.
(Reporting by Jake Spring; Writing by John Ruwitch; Editing by Jacqueline Wong and Christopher Cushing)