Companies, Investors Pouring Into China’s Bike-Sharing Market
This article is part of a series looking back at some of the most noteworthy China stories of 2016.
Forever’s instantly recognizable black-and-chrome bicycles have roamed Shanghai since the company’s founding in 1940, but lately, the most eye-catching two-wheelers on the city’s streets have been bright orange and yellow.
The colorful bikes belong to bicycle-sharing companies Mobike and Ofo, respectively. Both brands allow their users to unlock bikes with their smartphones, pay a small fee for a short trip, and leave them practically anywhere they want. So far, the formula has been a success, and through a cooperation with new bike-sharing startup Ubike, Forever is set to join in, with their green bikes slated to appear in downtown Shanghai sometime in December.
And Forever is not alone: Now that the business model’s viability and popularity have been proven, companies are jumping in one after another. The barriers to entry are low, and investors are eager to spend. Guo Ren, a consultant specializing in internet and transportation, told Sixth Tone that in an effort to compete, bike-sharing companies and their investors are currently pouring as much money into their businesses as possible without much concern for profits.
The latest colorful addition to Shanghai’s bike-sharing scene is Xiaoming, whose bicycles, apart from the sky-blue color scheme, are little different from those of its competition. Instead, the company differentiates itself on price: Its base fee of 0.5 yuan ($0.07) per 30 minutes is comparable to what Mobike and Ofo charge, but for users who refer the service to their friends, the price can drop to a mere 0.1 yuan.
The competition is only set to increase, as big investors are backing bicycle-sharing startups around the country. In its second round of funding in October, Xiaoming received 100 million yuan from investors, led by Cronus Bike CEO Deng Yonghao.
In Hangzhou, capital of eastern China’s Zhejiang province and the location of Alibaba’s headquarters, the tech giant in November announced a cooperation with startup Qibei that would launch 100,000 bikes in the city “in the short term.” Moreover, users with a high score on Alibaba’s Sesame Credit will not have to pay a deposit.
With militaristic language, Shenzhen-based Bluegogo announced in November that it would “take by storm” one city every 15 days. In the first four cities it would “occupy” before year’s end, the company said it wanted to deploy some 200,000 bikes.
Wang Huie, an analyst at Internet Consultancy Analysis International, told a Shenzhen newspaper in November it was inevitable that the current glut of “money-burning” companies would end up merging at some point, similar to how ride-hailing companies Didi and Kuaidi — and later Didi and Uber China — merged after a period of fierce competition.
Companies are also channeling the piqued interest in the sharing-economy business model into other vehicle types. Jiangsu province-based Xiangqi has started a pilot program in Shanghai for e-bike sharing, and has said it plans to set up 4,000 parking spots for a fleet of at least 150,000 e-bikes in 2017. In Chengdu, capital of Sichuan province in southwestern China, bike rental company Yongan announced in November that it, too, will launch an e-bike-sharing program in 2017.
Earlier this month in Shenzhen, a company called TOGO announced a service for renting Smart cars for as little as 15 yuan for a trip within a single city district.
The companies whose success these startups hope to copy, Ofo and Mobike, have grown rapidly in just a short period and have also received millions in investment along the way. Yellow-branded Ofo began in Beijing as a project by and for students at Peking University in September 2015. Now, just over a year later, the company has 230,000 bicycles in 22 cities, both on and off university campuses.
Li Zekun, a public relations manager for Ofo, told Sixth Tone that Ofo’s users log 1.5 million rides on an average day. In September, the company received tens of millions of dollars in investment from ride-hailing company Didi Chuxing, though the specific amount is undisclosed. “Our company is in the startup phase,” said Li. “I can’t reveal any details.”
The orange-wheeled bikes of Ofo’s main competitor, Mobike, first appeared in Shanghai in April and can now be found in six cities. Chinese tech websites have reported large investments in the company, but Zhai Xiang, a communications manager at Mobike, told Sixth Tone that she could not reveal any financial details, nor was she at liberty to say how many Mobikes the company currently operates.
Besides price and availability, there seems little to differentiate the various companies. All the bicycles are designed in a similar vein — small, sturdy wheels and as few potentially breakable components as possible. Ofo’s larger-wheeled bikes were outliers, but the company’s latest design is similar to those of its competitors.
Ofo currently stands out for not using an electronic lock. Instead, a user receives the code to the mechanical lock on their smartphone after scanning the bike’s QR code. But since the lock’s first iteration was easy to unlock without paying, and since the current version can be opened if the previous user hasn’t scrambled the lock, Li told Sixth Tone that Ofo is also considering electronic locks for the future.
Apart from the increase in competition, another challenge to bike-sharing is the upcoming winter, which in many Chinese cities brings not only a steep drop in temperatures, but also a rise in air pollution. Zhang Yiyao, a recent college graduate who lives 2 kilometers from her workplace in Beijing, told Sixth Tone that she’s reluctant to ride a bike in winter. “The wind slaps me in the face,” she said.
Li said that Ofo’s business in Beijing, in chilly northern China, is more adversely affected during the winter than in southern China. Last year, when it only serviced university campuses with a relatively small number of bikes, Ofo was able to survive the winter. But Li said the company is confident that its development since then will beat the cold weather again this year. “Business growth can completely neutralize the winter’s impact,” he said.
(Header image: A photo illustration of an older Forever bike next to Ofo, Mobike, and Xiaoming rental bikes in Shanghai, Dec. 12, 2016. Yang Shenlai/Sixth Tone)