Kakao to acquire carpool operator

Kakao Mobility, a mobility business spin-off of mobile service provider Kakao, said it will acquire local carpool start-up Luxi at 25.2 billion won ($23.4 million) on Wednesday.

Luxi, which launched its carpool service in 2016, has grown to be one of the major carpool service operators in Korea along with Poolus. Last year, the start-up attracted 5 billion won in investment from Hyundai Motor.

While Kakao Mobility has been operating taxi-hailing service KakaoTaxi, the company said it has been running short of drivers to meet surging demand, especially at peak times such as during commuting hours or after midnight. Kakao hopes to complement its existing service with the carpool app.

According to the mobility arm of Kakao, there were 230,000 calls for taxis through the KakaoTaxi app between 8 a.m. and 9 a.m. on Dec. 18, however there were only about 26,000 taxis available at the time. On a daily basis, the app gets about 2.4 million orders at maximum, the company said.

As conflict between carpool service providers and local taxi operators has been growing, Kakao made sure to note that the “carpool service will only be used to cover shortages of taxis and to alleviate customer inconvenience,” in a statement Wednesday, adding it will only offer carpool services “within the legal boundaries.”

Ride-hailing services like Uber are currently not able to operate in Korea as they are considered a threat to the local taxi industry and Korean transportation law prevents drivers without a professional license from driving for business.

Carpooling services are allowed to operate during commuting hours - from 5 a.m. through 11 a.m. and 5 p.m. through 2 a.m.

However, the dispute with taxi operators heightened last year after carpool service operator Poolus let drivers decide themselves which four hours in the morning and evening constituted their ‘commuting hours.’ Poolus said it was allowing for increasingly common flexible working hours, but taxi operators argued the start-up was trying to operate a 24-hour ride-hailing service.

The issue is still being disputed, with the taxi industry refusing to talk with carpooling business operators despite continued efforts from the presidential committee on the fourth industrial revolution to link the two parties for talks.

As Kakao has now brought both taxi drivers and a carpooling operation under its wing, it is likely that the mobility giant will attempt to mediate the dispute and come up with a business model that offers mutual benefits.

In the meantime, Kakao Mobility plans to keep expanding its business portfolio, which already includes taxi-hailing and driver-hailing services as well as a parking lot reservation service and navigation solutions.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]