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Business

Chauffeur driven vehicles thrive in China

China's top car rental company CAR has joined the car-hire business.

Commuters in Beijing have to endure severe traffic congestion during the day's two rush hours. Fights over taxis are intensifying and cab-dispatch apps are now virtually useless. But workers readying themselves for the bustle and congestion of getting to work have found their savior -- O2O Application.

     A Taiwanese person working for a foreign company, uses the app almost every day. Hired cars are more comfortable than taxis and the drivers are courteous. Drinking water, wet wipes, Wi-Fi and a battery charger are all available in the car. Some vehicles even play classical music in the background. "I can relax during my commute. Sometimes I go to work in a BMW or a Mercedes-Benz," said the avid fan of the new service.

     The app works in the same way those used for hailing taxis do. The only difference is that dispatched cars are privately owned. Users input information such as reservation time, departure point and destination. They can also select car models and makers as well as fares. The fee varies depending on the vehicle, which range from economy to luxury. The app automatically calculates minimum fare, distance charge as well as that for low-speed drives and other payments for long-distances, late-night rides or expressways. The minimum fare for a low-end car starts at 14 yuan ($2.25), almost the same as a Shanghai taxi fare.

     Cab-hailing app Kuaidi Dache operated by Alibaba Group is thought to have started the car-hire business in July 2014. One month later, another taxi-dispatch app Didi Dache, backed by Tencent, followed suit. When per-day orders surpassed 1 million, Didi Dache gave a 100-yuan payback to users. The two rivals merged this February, and launched a promotional campaign worth 1 billion yuan in March by waiving the minimum fare. The market is becoming more competitive with the entry of leading car rental company CAR.

     New car services are mushrooming in China. But this one is raising questions of its legality and safety. Some argue that private cars serving as limousines are unlicensed taxis. Chinese authorities maintain that they basically ban private cars from entering the car-hire business, but they are apparently granting tacit approval and leaving the matter to market principles for the time being.

Kosuke Okame is a Shanghai-based business and market research consultant.

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