<![CDATA[In South Korea, ride-hailing apps face off against powerful taxi unions and transport laws]>

South Korean ride-hailing app Tada thought its worries were over in February, when a Seoul court ruled that it could operate legally. But it has now ceased operations after the Korean National Assembly, the country's parliament, last week went against the ruling by passing a bill to limit its service.

The legal troubles of car-sharing app operator SoCar, which owns Tada, started in October 2019 when its chief executive Lee Jae-woong was indicted on charges of running a transport business without a proper licence.

In South Korea, the transport law restricts rented vehicles from offering rides for profit. Tada, which provides a driver and an 11-seat Kia Carnival to drivers, had relied on an exception in the law that allowed rented vehicles with 11 to 15 seats to offer ride-hailing services.

The Assembly on March 6 revised the legislation to restrict such services to tour purposes only. After the so-called Tada restriction law was passed, the service announced that it was going out of business, adding that its 1.7 million users would be disappointed.

Uber discontinued operations in South Korea in 2015, before returning to the country last year on a limited basis. Photo: AFP

Seoul's start-up companies have criticised the Assembly for protecting the taxi industry instead of supporting innovation before next year's general election.

"Whenever it seems that the government is on the cusp of changing the transport law, it falls under pressure and doesn't go through with its commitment," said Yu Jeong-whon, a professor of transport systems engineering at Ajou University.

There are some 270,000 taxi drivers in South Korea who are part of one of the largest and most active unions in the country. At the end of 2018, around 100,000 of them went on strike against a new carpooling service that was being launched by Kakao Mobility " with two dying after they set themselves on fire in protest.

The taxi drivers said apps like Kakao Carpool steal their customers when there is already a surplus of taxis on the road. Kakao Mobility eventually settled for providing carpooling services only during the limited commuting hours of 7am to 9am, and 6pm to 8pm.

"I would say the taxi unions are 70 to 80 per cent of the reason that the law is not changing after all these years," Yu said. "You can also make the case that it's all because of them."

Meaning "to ride" in Korean, Tada has risen to prominence since its launch in 2018 with little to no competition from domestic companies in the ride-hailing sector or global ride-offering services such as Uber, which were driven out by heavy opposition from Korean taxi drivers.

San Francisco-based Uber entered the South Korean market in 2013, discontinuing its flagship ride-hailing and car-sharing operations two years later. It has since operated in the country on a limited basis, while last year it added licensed taxi-hailing services to its operations.

"There are many other start-ups like Tada in the mobility industry that have failed to get off the ground because of the decades-old transport law," said Lim Jung-wook, the managing director of TBT Partners, a venture capital firm that invests in start-ups.

"These businesses are all over the world, and I think the time hasn't arrived for South Korea yet," he said. "But it's a matter of time as you can't go against the trend forever."

Korean firms Hyundai Motors and SK Group have bought stakes in Singapore-based ride-hailing firm Grab. Photo: Shutterstock

Lim said, however, he believed there was a market for mobility businesses with a proven niche to operate, especially those that appealed to younger customers. Yellow Bus and Safe School Bus are examples of start-ups that provide buses or vans to transport students from home to after-school academies.

Yu from Ajou University said he thought start-ups in South Korea were too small to stand up to the taxi unions and the government. He suggested that if major conglomerates like Hyundai or SK Group got involved, however, "a deal might be possible with the taxi unions at last".

In 2018, SK Group acquired an 81 billion Korean won (US$65 million) stake in Grab, the Singapore-based ride-hailing company which does not operate in South Korea. Hyundai Motors is also a major investor.

SK is a strategic investor in Grab, acting as a technology provider and offering critical tech assistance. The partnership will revolve around electric vehicles and map technology for autonomous vehicles, but SK has said there is room for expanded cooperation.

Companies in nearby countries and regions are also working with established taxi companies to form ride-hailing services.

In Japan, the electronics conglomerate Sony has worked with five licensed taxi companies for its ride-hailing service, called S. Ride.

The taxi industry in Hong Kong has created its own ride-hailing app, eTaxi, to compete with established services such as Uber. Another popular app, Fly Taxi, has some 50,000 drivers paying monthly or annual fees to provide taxi-like services.

Didi Chuxing, the leading ride-hailing service in China, accounted for 90 per cent of the country's total ride-hailing trips in 2017, but stricter licensing requirements since 2019 " after a series of incidents including the death of two passengers " have resulted in fewer numbers of eligible ride-hailing drivers on the road.

Members of the Seoul Private Taxi Association call for the enactment of a law to crack down on the ride-hailing service Tada during a March 3 protest. Photo: EPA

Oh Young-jin, a communications officer for the Seoul Private Taxi Association, said "order will be destroyed" if ride-sharing services are allowed to operate in South Korea.

"People who have not gone through the extensive tests and screenings that our taxi drivers have gone through should not be able to provide rides for people," he said, pointing to the fact that private taxi drivers in South Korea are required to have had three years of accident-free driving to be licensed.

However, Yu thinks this perception of taxis having safer and more professional drivers is just an illusion.

"Unlike the 1970s and 1980s, when driving was considered special, virtually everyone is able to get a driving licence today," he said. "Trust in the driver is, therefore, really a subjective matter nowadays."

While there are those who agree with Yu in wanting to see more options for ride-hailing services in the country, taxis generally receive good reviews from the public.

Kim J.J., an international student from the United States who did not want to give his full name, said he did not see a need for services like Uber in South Korea.

"I think the taxi system in Korea is excellent as it's affordable and you don't need to cover as many miles as in the US," he said. "However, I think some taxi drivers bring the problem upon themselves by refusing to drive certain customers based on their destinations and race."

Kim said he had occasionally seen taxi drivers deny short rides to foreigners who don't speak Korean.

Oh, from the private taxi association, admits that taxi drivers need to provide better service to compete with popular ride-hailing apps.

"Our drivers can be more friendly, but they are not going to be able to be like the young, cool Uber drivers," he said. "But we can definitely guarantee a smoother ride in our taxis."

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This article originally appeared on the South China Morning Post (SCMP).

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