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The Korea Herald
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THE INVESTOR
May 24, 2024

Mobile & Internet

Battle between taxis, car-sharing services reaches turning point

  • PUBLISHED :October 19, 2018 - 17:19
  • UPDATED :October 19, 2018 - 19:21
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[THE INVESTOR] On the same day thousands of taxi drivers in Seoul and surrounding Gyeonggi Province went on strike to protest Kakao’s planned launch of an Uber-like carpool service, Korea’s long-frustrated ride-sharing startups enjoyed unusual popularity.

‘The demand for PoolUs increased by 50 percent from a day ago and jumped by 150 percent during the morning rush hour,” CEO of car-sharing app Socar Lee Jae-woong said on Oct. 18.

PoolUs, which used to be the largest ride-sharing app, is an affiliate of Socar. It had been almost dormant since the Transport Ministry ruled that its services which interpreted commute hours more freely violated the law. Along with the demand from users, PoolUs which has about 140,000 drivers welcomed 10 times more new registration of drivers on Oct. 18. 

Tada, launched last month, saw six times more in demand compared with the same day a week ago.



Standoff

“Well, thanks to the taxi strike, I see a lot of Tada reviews posted today,” said a lawyer who wished to remain anonymous. “Ironically, the strike was a wake-up call for many people especially those who have never even thought about the convenience of car-sharing services.”

The strike by taxi drivers was initially triggered by Kakao’s carpool service, designed to connect non-taxi drivers to passengers during morning and evening rush hours. Kakao Mobility began recruiting drivers from Oct. 16 ahead of the official launch.

Taxi drivers insist that the service threatens their livelihood and are determined to stop it as they did back in 2013 when Uber launched Uber X service in Korea. At that time the Seoul municipal government and Transport Ministry had ruled Uber’s service as illegal.

Fast forward to November 2017, PoolUs tried to expand its operations by using a loophole in the transport law. In Korea, commercial operations of personal vehicles are prohibited with an exception for “commute hours.” While the law does not stipulate the exact time, PoolUs tried to interpret the commute hours to reflect the flexible working hours and diverse lifestyles by allowing users to choose their commute hours.

But the Transport Ministry ruled it as illegal. Facing regulatory hurdles and opposition from taxi drivers, PoolUs laid off 70 percent of its employees and the CEO resigned while its rival Luxi was sold to Kakao T in February.

It was in this backdrop that Tada was launched by Socar. Its business model is to provide an 11-seater recreational vehicle for rent and also assign a driver at the same time because the law only allows the commercial use of such vehicles.

Livelihood at stake

The resistance by taxi drivers is not entirely groundless. It is estimated that they earn about 2 million won (US$1,768) a month on average and the car-pooling services would inevitably take up a portion of the market.

“Without working at least 10 hours a day, we cannot maintain a basic life,” said Park Bok-gyu, chairman of the Korea National Joint Conference of Taxi Association, during a rally. “Now under the name of the fourth industrial revolution and innovation, they are destroying our lives.”

But this time, the government and startups seem as determined as taxi drivers that this is not a change that one can resist and are keen to see that new startup like Tada survive. 




Inevitable changes

“If allowing carpool services is something our economy has to go through, we’d better be prepared,” Minister of Strategy and Finance Kim Dong-yeon said on Oct. 19. “While doing so, we have to come up with a social consensus and compensation for potential victims.”

“Mistletoe CEO Taizo Son said that self-driving services would be fully operational by 2023 and the cost of transportation would be reduced by 30 percent. That’s only five years from now,” Lee of Socar said. “The government has to work to reform the regulatory framework so that innovation can be quicker and bolder, resulting in increased utility and productivity for many people, while protecting those who might lose their jobs as a result of this.”

Perhaps tired of hearing about how other countries are racing ahead of Korea when it comes to innovation, or just the desire for better services, a majority of the citizens hope to have carpool services.

According to a recent survey conducted on Blind, an anonymous community app for workplaces, out of 5,685 respondents, 56 percent said carpool services should be allowed for 24 hours while 34 percent of them backed partial permits such as for rush hours.

“I had some empathy for taxi drivers back then but my thoughts have completely changed after I spent a year in Shanghai using China’s car-sharing app,” a 25-year old graduate student Shin Jeong-yeon said. “I can understand why taxi drivers are afraid of the changes but now I know with these services that customers in other countries are enjoying things could get so much better.”

By Park Ga-young (gypark@heraldcorp.com)

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