INTERNET: Uber Eyes Beijing Accord, Finds Partner in Xiaomi

Bottom line: A special meeting between 8 Chinese government agencies is a positive sign for Uber and its rivals, indicating Beijing wants to forge a unified national policy to foster the development of hired car service operators.

Beijing meeting sends positive signal for Uber

The brash Uber and its rivals are seeing some encouraging signs in China, with reports that Beijing has convened a special meeting of 8 ministries to clearly define a national policy on these up-and-coming providers of hired car services. At the same time, Uber has broadened its stable of China partners by forming an alliance with homegrown smartphone sensation Xiaomi to promote their products and services in Southeast Asia. Lastly, Uber is also in a slightly troubling headline that spotlights some of risks it will face, as media in southern Guangdong province report that one of the company’s drivers may have been murdered by a customer.

Uber and rivals like Didi Kuaidi and Yidao Yongche have been in the China headlines nearly nonstop for most of this year, reflecting their sudden explosion onto the hired car services scene. The controversy is coming mostly from their business model that uses independent car owners to shuttle customers from place to place. Those services compete with traditional taxis, and therefore have drawn huge protests from taxi drivers.

Such private car services are also a bit harder to control in terms of quality. That issue is reflected by the occasional reports of rape and other misdeeds by drivers who are usually private car owners working with Uber and others as independent contractors. This latest murder case in Guangdong raises similar issues, though it’s worth noting that traditional taxi drivers also face similar risk of robbery and other crimes by their customers.

All that said, let’s begin with the most important big picture story, which says Beijing has convened an unusual meeting of 8 different government agencies with regulatory authority over private car service providers. (Chinese article) The meeting looks aimed at hammering out a unified approach to regulating these companies, which have become hugely popular due to their lower prices and often superior service over regular taxis.

Media have swarmed to the Uber China story in general due to the company’s foreign roots and its aggressive $1 billion spending plan for the market this year. That expansion has seen Uber encounter numerous obstacles from local governments, including raids on its offices in 2 major cities earlier this year. But the reality is that domestic rivals are facing similar government scrutiny due to their equally aggressive practices and protests from local taxi drivers.

Positive Signal

Against that backdrop, this latest meeting of so many national government agencies looks encouraging as it appears to show that Beijing intends to let the industry develop and doesn’t plan to shut down services like Uber. But it also wants to lay out a unified policy to promote orderly development, and ensure against fraud and other potential problems that could occur with such rapid development of a new sector.

One of those potential problems is the safety of private car drivers, which was in the spotlight with a case that saw a hired car services driver possibly killed by a customer in the southern city of Shenzhen. (Chinese article) The reports cite the driver’s family saying that he worked for Uber, and that he disappeared after picking up a customer for a 300 yuan fare.

This kind of crime happens in taxis also, though most taxi drivers are full-time employees who probably receive special training to help them avoid becoming such victims. This particular case may put pressure on Uber, Didi Kuaidi and others to improve training for their drivers, adding to their costs.

Last there’s the new Uber tie-up with Xiaomi, China’s fast-rising smartphone maker that is trying to keep up its breakneck growth by going global. Xiaomi entered the Southeast Asia market last year, and now the latest reports say it is teaming with Uber to promote its trendy smartphones in Singapore. (English article)

This particular move is relatively small and comes after Uber signed up leading Chinese search engine Baidu (Nasdaq: BIDU) as a strategic investor. But it does show that Uber is trying to work with local partners as much as possible in its bid to quickly expand its global footprint, in a smart strategy that should help it to gain acceptance by governments in its host countries

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