Transport Earthquake
The long awaited earthquake in Hong Kong’s taxi/ride hailing scene is almost upon us and the questions now are how big the initial shock will be, and how many aftershocks we can expect. The important thing in the coming months will be to keep the focus on protecting the interests of the traveling public.
More than a decade after Uber first set up in Hong Kong, operating in a regulatory grey area, the administration is finally moving to overhaul our ride-hailing system. Tech platforms are being invited to apply for registration this quarter with licences expect to be awarded by late November. In the fourth quarter, individual vehicle owners will be invited to apply for one of the intended first batch of 10,000 driver permits. The government expects regulated services to begin in December.
The reason Hong Kong has arrived so late at the ride-hailing party will be very familiar to all long-time residents: the determination of vested interests in the existing taxi trade to protect their turf, and unwillingness of the government until recently to confront them. Even within the taxi trade, interests are not monolithic as the majority of the 40,000 or so drivers do not own their vehicle, but instead rent on a shift basis from one of the 8,000 or so individual and company licence holders. Up to now the interests of the two groups have largely coincided but one question outstanding is the extent to which the new regime may cause these interests to diverge more sharply. Will more drivers wish to own their vehicles to enjoy the full fruits of the ride-hailing system?
There are currently four tech platforms offering ride-hailing services here: Uber, Didi Chuxing, Tada and Amap. Assuming all four apply and are successful – and assuming no last-minute gate crashers seek to join the party – then an obvious question for 2027 is whether there will be a degree of amalgamation which has tended to be the practice elsewhere in Asia. The nature of the industry favours scale operators as they are better able to offer a comprehensive service which in turn would attract more drivers to register with them, thus enabling them to provide a better service, and so on. So we could start with four and quickly concentrate to one or two dominant players.
Far and away the most controversial area will be the number of individual driver permits. The established taxi trade did not want any, or a few thousand at most. Long time trade leader Chan Kwok-keung feared for the future of the industry and said drivers were already suffering loss of income. He was particularly concerned that the government would increase the quota beyond the initial proposal of 10,000.
On the other hand, Uber said it had 30,000 part time drivers registered with its company alone, so the 10,000 would fall well short of market needs. The company expressed concern the result would be a deteriorating service level, with longer wait times, and higher fares.
The government defended the figure as a prudent initial step but undertook to keep the situation under close review and consider the case for additional quota in the light of actual market experience. It promised to “dynamically adjust” the number if justified.
The regulations were gazetted in June and are subject to the negative vetting arrangements. As part of that process they were discussed in the Legislative Council earlier this month. Legislator Mark Chong Ho-fung warned of an explosion of public discontent if key issues were ducked and the can was simply “kicked down the road”.
I would like to comment on two relatively minor aspects of the proposals as they stand before turning attention to the main issue. First, I think the regime should have specified that only fully electric vehicles would be eligible to provide ride-hailing services. This would have sent an important signal to the market of our determination to reduce roadside emissions. Secondly, ownership of a vehicle should entitle both that person and the spouse to apply for a driver permit, not just the owner alone. A ride-hailing family should not have to be a two-car one.
On the big picture, I have argued before in this column that there should not be any limit on the number of driver permits. Other cities manage without one and I think in Hong Kong’s circumstances given the cost of acquiring and maintaining a vehicle, and of complying with the relevant regulations for the vehicle and the driver, we could and should have left it to market forces to find the right balance. Given that is not the position now proposed, then it is vital the future reviews be frequent and truly dynamic. There will be a lot of opposition to any suggestion to increase the quota. The taxi trade can be relied on to keep up its “doom and gloom” lament, while there will now be a new vested interest to take on: the lucky 10,000 drivers who are successful in the draw for the first batch of permits. Their income will be directly affected by any issue of additional permits so they have a stake in the discussion.
It is vital in such circumstances that the administration put the wider public interest first. After all, as the government’s earlier information paper noted, ride-hailing services had captured fully 22 per cent of the point to point transport market and involved 114,000 such trips per day. These numbers were achieved in the face of official indifference not to say actual opposition in the early years. The people have spoken, and a wise government would pay attention.