Twelve years after illegal ride-hailing was launched to compete with taxi services in Hong Kong and give passengers a wider choice, the government has embarked on the last stage of a long journey towards regulating them and putting them on a legal footing. The major issue for stakeholders in both the taxi industry and ride-hailing platforms – and for customers – is the hotly disputed cap on the number of ride-hailing vehicles to be allowed on the road.

The Transport and Logistics Bureau says it will finalise the cap and the technical regulatory framework in time to make them law before the Legislative Council’s recess in mid-July. Authorities say they will continue to solicit views from different sectors while taking into account public transport needs, passenger experience and the impact of capacity on road resources and the public transport ecosystem. The views of customers – both taxi users and those who have turned to ride-hailing platforms for service – should weigh equally with those of other stakeholders.

Even at this late stage, the government has rightly adopted a cautious approach to regulation, including reconciling widely divergent views on how many ride-hailing vehicle permits to allow among operators such as Uber, Tada, Amap and Didi Chuxing, which currently operate in a regulatory vacuum. Amap is operated by Alibaba Group Holding, which owns the South China Morning Post.

Hong Kong is not to be compared in size or urban density with other major Chinese cities with ride-hailing services. Authorities need to weigh a number of factors carefully – such as peak-hour demand and the full- and part-time availability of drivers – if reform of the industry is to result in the intended enhancement of services.

Hong Kong has more than 18,000 registered taxis. Various calls for a cap on ride-hailing permits reflect vested interests. Some taxi operators’ associations called for a cap of about 2,000 and ridiculed a suggestion of 10,000 cited in a government paper. One association described ride-hailing as supplementary to licensed taxi services. Whatever cap the government sets initially, it can review and lift it if it proves too cautious to meet demand.

The bureau plans to ask ride-hailing platforms to apply for licences in the third quarter of this year so they can operate under the new regime by the fourth quarter. It has also outlined penalties for operators who fail to comply with the rules, including fines of up to HK$1 million (US$128,000) and 12 months in jail upon conviction.