Shanghai Street View: Taxi Apps

This week’s edition of Shanghai Street View literally takes us to the street, as I look at the recent explosion of taxi apps that have cropped up in the city’s cabs and the backlash it’s created. I particularly like this story because it represents the collision of technology with two very Chinese elements, namely the concepts of backdoors and state-set prices that are often artificially low.
Taxi apps have been creeping up on most of us for the better part of the last year, as a steady flow of entrepreneurial companies rolled out myriad software aimed at helping people to call cabs from their smartphones or computers. The story careened into the headlines several weeks ago when one particular photo emerged of a cabbie with one of the busiest dashboards I’ve ever seen.

The photo showed not one, but 3 or 4 smartphones and tablet PCs mounted on the cabbie’s dashboard and windshield, allowing him to find nearby passengers from different apps at almost any given time. The idea was simple but also quietly brilliant, as it significantly boosted the cabbie’s efficiency by letting him drive from one customer to the next without driving around aimlessly wasting time and fuel in between trips.

Of course the only problem was the small matter of safety, as numerous netizens and others who saw the photo pointed out that so many devices would ultimately distract the cabbies and could potentially lead to accidents. I’m generally not afraid to ride in most of Shanghai’s cabs, even when drivers often do crazy things like make U-turns on busy streets and change lanes five times in just a few seconds just to run a traffic light that’s just turned red.

But I do object to things that might distract a driver, like talking on a cellphone, and I might also think twice about getting into a cab with so many apps buzzing on its dashboard. One TV report I saw even managed to track down the driver and question him about his famous cab, prompting him to admit that he’d gotten rid of all but one of his favorite apps after the storm of publicity from the photo.

Now it seems that these taxi apps are raising yet another controversy, bringing me back to this collision of the old and new that I mentioned earlier. The latest uproar centers on taxi drivers and software developers who are using their apps to charge extra fees above the official fare levels, especially during peak hours, rainy days and other times when it’s hard to find a cab. (Chinese article)

The cabbies are basically using these apps as a sort of backdoor to circumvent artificially low fare levels – a relic of China’s old socialist system where all prices were set by the state. I know that Shanghai and other Chinese cities aren’t the only ones that set local taxi fares, and most other major cities around the world also use similar systems.

But the big difference is that China’s fares are set extremely low, to the point where people often end up taking taxis in almost any situation just because it’s so cheap. That contrasts sharply with most of the West and Japan, where people only take cabs when they’re really in a hurry since such transport is often quite expensive.

China’s artificially low fares mean that taxi drivers often have to work 12 hours a day or longer just to earn a decent wage. From the consumer side, such low fares mean passengers often have to wait a while to get a taxi, sometimes a half hour or more during peak hours. And even then they have to argue and jostle with other people also looking for cabs, making the task that much more unpleasant.

Against that backdrop, this innovative use of technology seems quite reasonable. On the one hand, it allows cabbies to raise fares through the use of app-based surcharges during peak hours, thus raising their salaries. At the same time, it also efficiently allocates a scarce resource, the availability of taxis during peak times, by giving that resource to the highest bidder.

The only problem is that Shanghai city officials have decided they don’t like this kind of backdoor run around the state-set pricing system, and are taking steps to formally ban the app developers from most of their surcharges and other bidding systems.

I do agree that the city may need to step in and regulate this fledgling but booming industry, which is showing many typical signs of spinning out of control due to the entry of overzealous and often unscrupulous entrepreneurs. But surely everyone can find a middle road that allows for extra charges at reasonable levels that would benefit nearly everyone, except of course for those people who like to use taxis as a form of personal driver because they’re so cheap.