The Korea Herald


New ride services pose challenge to taxi industry

Following success of Tada, Korean mobility startups launch operations with car rental companies

By Yeo Jun-suk

Published : June 21, 2019 - 17:36

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 An increasing number of mobility startups have released their business plans for ride-hailing services in cooperation with car rental companies here, further stoking controversy in the competition with the conventional taxi industry.

Mobility firm Chacha Creation said Thursday it will work with two local car rental companies to introduce a new car-sharing platform, ChaCha Van service. Limo Korea and Isaac Rental Car will partner with ChaCha to provide cars for the carpooling service scheduled to launch in August.

Through mobile apps, users can request the service by calling a van with 11 seats -- the only type of vehicle allowed to offer driving services in Korea other than registered taxi operators. ChaCha said it aims to operate 1,000 vehicles by the end of this year. 

“We are going to establish a harmonious car-sharing service that caters to the needs of all Korean people,” ChaCha Creation Chief Lee Dong-woo said after signing the agreement with the car rental companies.

Taxi drivers hold a protest against Tada`s carpooling service. Yonhap Taxi drivers hold a protest against Tada`s carpooling service. Yonhap

Based on the business model first introduced by Tada last year, local mobility firms such as ChaCha have been seeking to compete against the taxi industry.

The system taken up by Tada and ChaCha involves borrowing minivans from either its own subsidiary or local car rental services. Tada supplies its 11-passenger minivans through the company’s own rental service, Socar to avoid violating local regulations.

Drivers are banned from paid riding services other than those registered as taxis, but the regulation does not apply to minivans with 11 seats or more. The exemption was designed to help users of rental car services have safer use of larger cars that they borrow as a way to boost tourism.

“Drivers rent those minivans under a long-term contract and use them as if they are their own cars. When they accept a call for a ride, they are, in fact, suspending the contract and lending the cars to the caller. … It’s like the drivers are hired by the callers for that particular time frame,” an official from ChaCha said.

Taxi drivers say the recent slew of new ride businesses are abusing a legal loophole. Associations of taxi drivers have fiercely protested their potential new rivals for killing their jobs with the “illegal business.”

The government, for its part, has struggled to mediate the situation, although it did help draw out a consensus between the taxi associations and Kakao in eventually working together to launch their version of a ride service called Waygo earlier this year.

The controversy has spilled over into politics, with some opposition lawmakers accusing Tada of violating labor laws by hiring temporary workers for driving jobs.

“Tada drivers are temporary workers paid on a daily basis. Living under the fear of being fired, they can’t enjoy the benefits of a social safety net. They don’t meet rigorous driving qualifications required for taxi drivers,” said Rep. Kim Kyung-jin of the minor Party for Democracy and Peace.

Tada has refuted the criticism, saying its business is “perfectly legitimate.” The company also reiterated its plan of launching a “Tada Premium” service, hiring licensed taxi drivers running expensive cars for higher fees and better service.

Last month, Tada said its users surpassed 600,000, and more than 1,000 minivans were in operation for the car-sharing service. According to the company’s own research in February, about 90 percent of those riding in Tada minivans would use the service again.

By Yeo Jun-suk