Uber’s China Problem: Prices are rising as quality is declining
When I started using Uber in Beijing at the beginning of the year, it was cheap, easy and much more convenient than trying to catch one of the city’s mercurial cab drivers who decides he doesn’t want to go where you want to go. Recently, Uber’s prices have been falling, but some of their other policies, like introducing surge pricing in Beijing, appear to have brought more Uber drivers on the road. In most circumstances, this would be considered a good thing, but in China, Uber drivers appear to have brought the bad habits of the country’s taxi drivers with them.
After booking an Uber, it’s customary for the driver to call and figure out where you are and where you want to go. Increasingly, Uber drivers are telling people they are not headed in the direction the customer wants to go or make up excuses. I recently tried to get an Uber from Tsinghua Unversity’s campus to Sanlitun Village on the other side of town. The driver said the roads were blocked, which wasn’t true, and that he could just drop me off at the subway in Xizhimen, which is only three subway stops from campus. It was obvious the real issue was that the driver simply didn’t want to go to Sanlitun.
Uber drivers have also apparently been involved in trying to fraud the company by creating multiple accounts or getting friends to book rides with them so they can meet the necessary quotas for a monthly bonus. An Uber representative said such drivers make up a “tiny fraction” of all its drivers in the country, which I’m sure is true. But in just six months, the experience of using Uber has become increasingly frustrating in Beijing. I have recommended it to friends, hyping how great the service is compared to taxis here, only to have them get turned down by multiple drivers.
To be fair, most of my experiences with Uber have been good ones, with problems only becoming apparent to me this month. Also, service could vary city to city. At the end of May, I had another great, seamless experience with Uber in Shanghai. Still, Uber is growing fast in China and this might be resulting in some growing pains.
Uber’s rapid rise in China is, of course, intentional. The company has been spending a lot of money here and has even been “paying its drivers more than the fares they collect.” As Uber grows, so do local conflicts. The company’s offices have been raided in Guangzhou and Chongqing. Weeks after the raid in Guangzhou, the city announced its own ride-hailing service, Ruyue, that will use the city’s taxi services. Didi Kuaidi, the country’s largest ride-hailing service after a merger of two similar companies, works similarly. The company recently announced a carpooling service and rides from “high-end taxis.”
Increasing competition from “illegal taxi” services like Didi Kuaidi and Uber has contributed to tension among cab drivers and protests have broken out in some cities. After a violent confrontation between drivers and authorities in Hangzhou, Uber issued a warning to its own drivers to avoid such confrontations or risk being fired.
In addition to all these problems, I’m not certain surge pricing is a good strategy in Beijing. Taxis are not actually that expensive. During normal hours, the “People’s Uber” can be cheaper than a taxi. However, I recently went to call an Uber and found that demand pushed prices up 3.4 times the normal rate. It was going to cost me more than 100 RMB to get home, but I wound up taking a taxi for less than 50. Surge pricing makes sense when it is very difficult to get a cab, but that is not actually a common situation in Beijing. If you’re willing to spend five to 10 minutes trying to hail a cab, most of the time you’ll be able to get one.
Many new problems are clearly emerging for Uber in China. I don’t know what this means for the company, although it has shown itself to be pretty resilient. The company has been a magnet for controversy almost since its inception. I do believe, though, that Uber will need a stronger hand in how its drivers operate in China to ensure quality. If it simply operates like other taxi services and prices are no better than the illegal “black taxis” that are already on the road, the incentive to use the service disappears. And as Uber’s intense spending already indicates, China can be a tough market to crack. The story with hyperlinks is published here: http://matthaldane.com/post/121584783262/ubers-china-problem-prices-are-rising-as-quality