Uncertainty surrounds future of mobility apps

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Uncertainty surrounds future of mobility apps

A major revision to Korea’s private transportation service laws has received substantial attention for banning the business model of popular ride-hailing service Tada. But while closing that door, the National Assembly also has opened one that allows ride-sharing services to either work with the existing taxi industry or pay it off in order to hire outside drivers.

All eyes are on Tada. On Feb. 7, the app’s users received a notice that the service would be closing down within a month, a day after the National Assembly approved the measure.

Some start-up industry insiders have suggested that Tada’s announcement that it would shut down amounted to little more than last-ditch effort to change lawmakers’ minds.

The bill, if signed by President Moon Jae-in, would effectively close a loophole in existing laws that allowed Tada to operate. Ride-hailing services like Uber have always been illegal, but that previously didn’t apply to vans. The new law limits ride-sharing vans to those operated at airports and seaports or for a period of at least six hours.

Tada Assist, one of the company’s van-hailing services, halted operations on Sunday. It was a service specialized for customers with physical or development disabilities, but it was more costly to operate than its other service types.

But it won’t be easy for Tada operator VCNC, or VCNC’s parent company Socar, to completely walk away from the mobility business for good, given the investments that have been already made in the service. Socar’s major stakeholder is its CEO, Lee Jae-woong, followed by Korean conglomerate SK Group. Altos Ventures and Softbank Ventures have also invested money in the venture.

Tada could potentially restructure its business model based on its Tada Premium service, an upscale ride-hailing service that uses sedans driven by licensed taxi drivers. It could also focus more on its Tada Air service, which provides van transportation to and from airports. As for Tada Basic, there’s a possibility it could be incorporated into the newly appointed platform taxi system.

The new transportation law lays out a general framework of regulations, but many details have yet to be hammered out in the actual enforcement of the newly banned practices. Mobility start-ups will be allowed to operate as “platform taxi” services. But platform taxi vehicles will be limited to a yet-to-be-determined number, in order to protect the livelihoods of taxi drivers. Start-ups will also be obliged to pay a “contribution” from their revenue to support the taxi industry. This amount has also not been decided.

Some worry that setting the numbers too high could limit the field of competition to companies already armed with substantial capital resources, crowding out smaller innovators. Existing start-up companies are already saying they’re eyeing the possibility of launching a platform taxi service but will wait until more details are hammered out.

“We plan to discuss the matter in a meeting with relevant start-ups soon,” said Jung Mina, a director at the Korea Startup Forum, a nonprofit representative of the country’s start-up industry.

The basic question for consumers, however, remains: How effective will the new law be in promoting new services to satisfy demand? Tada was a popular, highly-acclaimed service, and its users praised it for resolving problems in taxi services including unpleasant drivers and their refusal to provide short-distance rides. Lawmakers promoted the revised law as a way to open up new business opportunities, but their votes could be called into question if no new services emerge to satisfy consumers.

It also remains to be seen how emerging platforms will deal with taxi drivers. Kakao Mobility and KST Mobility have offered services that allow users to request taxis via mobile apps, and their customer satisfaction was on par with Tada’s. Unlike Tada however, those services had a business model built on partnerships with taxi drivers, giving them less control over the experience between the drivers and the customers.

“Tada elevated the customer standard for mobility services. Now, the entire policy’s assessment depends on how well new platform taxis satisfy their needs,” said a mobility start-up CEO who requested anonymity to be quoted for this story.

BY PARK MIN-JE [song.kyoungson@joongang.co.kr]
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