Car services on trial in China

A customer checks his smartphone app that eases finding a taxi. [Photo/China Daily]

JINAN - The country's first trial involving special car services popular in major Chinese cities opened on Wednesday in a court in East China's Shandong province.

Special car services, called "zhuanche" in Chinese, are controversial. Under Chinese law, private car owners may not transport passengers for profit. Taxi-hailing apps claim that they cooperate with car rental firms to avoid regulatory problems, but it has been hard to exclude private car owners, who can easily register with rental companies.

Chen Chao, a private car owner in Jinan, the provincial capital, demanded the Jinan public passenger transport administration center revoke the 20,000 yuan ($3,257) fine it issued to him.

Chen was caught carrying passengers who found him via the popular cab-hailing app Didi Dache in January and was fined by the center. The plaintiff insisted his operation was not illegal, though the center claimed Chen had no license to transport passengers.

The Jinan Shizhong District Intermediate People's Court has yet to issue a verdict, but the decision will have a landmark impact on the booming car service industry in China.

The state taxi management system is characterized by stringent market entry requirements and a cartel of taxi companies. Taxi drivers in some places complain they are asked to pay too much for contract fees, while passengers often find it difficult to hail taxis when they need them.

Didi not only provides cab-hailing services to connect passengers with professional taxi drivers, but also offers luxury car pick-ups, which cost at least twice the normal cab fare. Despite the high prices, the luxury car service is still popular.

Didi's zhuanche service was launched in August of last year and has operations in more than ten cities.

In Jinan, home to 8,500 official taxis, the number of zhuanche cars has risen to 4,000. Some taxi drivers have even shifted to providing zhuanche service for more income.

Wang Xinliang, a lawyer in Shandong, said whatever the verdict is, the case will push authorities to address the challenges for passengers to hail taxis through reforms in the sector.

The court should consider the opinions of the public when issuing the verdict, said Wang.

China's Ministry of Transport banned private cars from taking passengers for profit in January and ordered app developers, including Didi and a similar service, Kuaidi, to only dispatch cars owned by taxi or car-rental companies for ride-on-demand services "out of safety concerns."

Zhuanche services have been declared illegal in cities such as Beijing and Shanghai. However, many citizens still favor the illegal service.

Yang Chuantang, minister of transport, said in March that a guideline for zhuanche service development will be issued as soon as possible.