August 10, 2017 1:48 am JST

Uber stuck in neutral under Hong Kong taxi regime

US ride-hailing company's disruptive approach collides with industry's local clout

YASUO AWAI, Nikkei staff writer

Hong Kong's taxi industry has not taken kindly to Uber's attempt to muscle in on its turf.

HONG KONG -- Uber Technologies' ride-hailing service is stalling in Hong Kong, cut off by taxi interests that wield heavy influence in local politics.

Law enforcement authorities in May arrested 22 Uber drivers on suspicion of operating without a taxi license or auto insurance.

"Some companies ... hope they can run their businesses and not come under any regulations," said Anthony Cheung Bing-leung, Hong Kong's then-transport secretary, when asked about the U.S. company. "I believe that no countries and no governments would allow that."

The Hong Kong government has capped available taxi licenses at around 18,000 for more than two decades. Licenses trade for a cool 7 million Hong Kong dollars ($895,000) or so each. Letting Uber and its ilk into the game would blow a hole in their value, risking huge losses for those connected to the business.

Half of the 70 seats in Hong Kong's Legislative Council are elected by functional -- as opposed to geographical -- constituencies, whose voters include industry bodies. The taxi industry commands a great number of votes, and legislators representing it wield significant authority in government.

Andrew Macdonald, Uber's regional general manager for the Asia-Pacific region and Latin America, told The Nikkei that the taxi industry is strictly regulated around the world. But "it hasn't always been to protect consumers. It's been done to protect companies," he said.

Only a few Asian countries have allowed the use of private cars for ride-sharing, as in the U.S. But some emerging economies such as Myanmar are beginning to allow dispatch services for licensed taxis and hired cars. The Asia-Pacific region contributes about 20% of Uber's business overall.

While Uber's defiantly regulation-flouting behavior has drawn criticism, dissatisfaction also runs deep with Hong Kong's taxis, which frequently refuse passengers. Some 76% of respondents to a survey by Uber and the Chinese University of Hong Kong said an alternative was needed.

Uber's app has garnered more than 1 million downloads in Hong Kong. "There is no one-size-fits-all model. We are happy to change our business model, as long as consumers and drivers are put first," Macdonald said. 

Finding points of compromise between ride-hailing apps, a flagship of the sharing economy, and the existing taxi industry is one of the challenges facing Hong Kong's new chief executive, Carrie Lam Cheng Yuet-ngor, who took office last month.

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