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Ridesharing Hits a Speed Bump in South Korea

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The Koreas

Ridesharing Hits a Speed Bump in South Korea

Tens of thousands of taxi drivers strike against a new app from tech giant Kakao.

Ridesharing Hits a Speed Bump in South Korea

Tens of thousands taxi drivers and workers shout slogans in a rally to protest a commercial carpool service near the government complex in Seoul, South Korea (Oct. 18, 2018).

Credit: AP Photo/Lee Jin-man

Tens of thousands of taxi drivers gathered in Seoul’s Gwanghwamun Square on October 18 for a one-day strike organized to protest a possible new carpool app from Korean tech giant Kakao. According to the Korean Taxi Workers’ Union, 60 percent of Seoul’s 100,000 taxi drivers joined the strike, alongside high participation in smaller protests organized in cities around the country.

The trouble started on October 16 when massive tech company Kakao announced it was recruiting drivers for a new ride-sharing app called Kakao T Carpool. Kakao has been operating Kakao Taxi in South Korea for the last several years, allowing passengers to call, reserve, and pay for a licensed taxi through an app. However, this new plan would allow passengers to avoid official taxis altogether — a move that the taxi industry says could completely destroy their ability to do business.

For their part, Kakao has insisted that they can work alongside taxi drivers, not undermine them. “The envisioned carpooling service will greatly alleviate the inconvenience riders suffer due to a supply-demand imbalance in taxis in the morning and late-night hours,” a Kakao spokesperson said. “It will not steal away jobs from taxi drivers, but rather work as a supplement to the taxi business.”

If Kakao’s plan comes to fruition, it will be the first major rideshare platform allowed in Korea since Uber effectively pulled out of the market in 2014 amid regulation concerns and a similar backlash from taxi drivers. After some back and forth in the legal sphere, in 2015 the Korean National Assembly passed a blanket ban on providing taxi services without a license, and on matching riders with drivers without a taxi license. South Korea has since allowed some ridesharing, but only during busy “commuting hours.”

Small startups have still faced regulatory issues, however — rideshare app PoolUs was sanctioned in 2017 for interpreting “commuting hours” too loosely, and had to lay off 70 percent of its employees. A startup called Luxi also faced issues, and was sold to Kakao in February this year, perhaps sparking the tech company’s push into the space. Tada, which launched just last month, has tried to avoid some of these hurdles with a new business model using shared 11-seater vans instead of personal cars.

Ironically, last week’s taxi strikes brought unprecedented spikes in business for these apps —  app Socar reported a 150 percent spike in demand during morning rush hour on the day of the strike, and Tada announced that rides were up six-fold over the same day the week prior.

The South Korean public seems to be behind Kakao in the debate. In a Realmeter survey conducted on October 19, the day after the strike, 56 percent of respondents approved of the company’s plan for a carpool app, with 28.7 percent saying they are against it. In another survey of South Korean workers on the app Blind, a whopping 90 percent of those surveyed responded positively, with 56 percent saying the government should go further and allow ridesharing during all hours of the day.

Perhaps because of this overwhelming public response, South Korean lawmakers seem more willing to work with ridesharing this time around. It also doesn’t hurt that the app in question is from homegrown company Kakao, as opposed to foreign import Uber.

Supportive lawmakers have pointed to issues with taxis, such as refusing passengers based on their destination, as more reason to allow increased competition in the transportation market. Minister of Strategy and Finance Kim Dong-yeon seemed to indicate a reluctant approval in a statement on October 19, saying, “If allowing carpool services is something our economy has to go through, we’d better be prepared… While doing so, we have to come up with a social consensus and compensation for potential victims.”

Jenna Gibson is a doctoral candidate in political science at the University of Chicago and a Korea blogger for The Diplomat. You can find her on Twitter at @jennargibson.