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Sharing Economy

Tokyo taxi rivals team up to ward off Uber and Didi

New threat leads Japan companies to seek safety in numbers

Taxis from companies including Tokyo Musen, front, wait for riders outside Tokyo Station.

TOKYO -- The threat of foreign ride-hailing apps has pushed Tokyo's two leading taxi companies into an unlikely alliance, sharply boosting the number of vehicles in the city under the purview of Japan's top taxi app.

Starting July 25, vehicles belonging to Tokyo Musen can be ordered on JapanTaxi -- Japan's largest taxi-hailing app, run by rival Nihon Kotsu. This amounts to a merger of the companies' fleets of around 3,800 taxis and 4,500 taxis, respectively, in Tokyo. Nationwide, JapanTaxi provides access to 60,000 cabs, and has been downloaded over 5 million times.

Nihon Kotsu, famed for its bright yellow cabs, and Tokyo Musen, in green, have long been fierce rivals. But competition is growing, prompting the pair to seek safety in cooperation.

The allies' most formidable ride-hailing rival at present is a team of seven other domestic taxi companies with a combined fleet of roughly 10,000 vehicles, mostly in Tokyo. But a new type of competitor is on the horizon. Ride-hailing services such as U.S.-based Uber and China's Didi Chuxing are close to launching in Japan, and "fighting them requires forming an all-Japan alliance," said an industry official.

The traditional peer-to-peer business model of ride-hailing apps, where drivers transport customers using their own vehicles, is in principle banned in Japan. The overseas giants therefore look to crack the Japanese market by partnering with local companies and using their smartphone-based taxi-hailing services. While Japan's taxi market is shrinking somewhat overall, it is still worth roughly 1.7 trillion yen ($15.3 billion) annually.

Uber on July 21 began a pilot partnership with a taxi operator on Awaji Island in western Japan. Once its app-based ride-hailing system is tested there, the company hopes to sell its services to other taxi providers around the country. Uber says it is already in talks with more than 20 potential partners.

Didi has launched a joint venture with major shareholder SoftBank Group to provide similar services. Taxi companies will pay nothing at first. Trials are to begin in Osaka this fall and gradually expand to other areas, including Tokyo, Kyoto, Fukuoka and Okinawa. Daiichi Koutsu Sangyo, Japan's largest taxi company, is looking into a partnership with the Beijing-based company.

It only makes sense to enter a market where the number of seniors unable to drive and the ranks of foreign visitors are growing, said Jean Liu, president of Didi.

In addition to backing Didi, SoftBank is Uber's largest shareholder. SoftBank Chairman Masayoshi Son has called Japan's ban on peer-to-peer ride hailing a symptom of "crisis," saying the country is "standing in the way of its own future development."

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