The first merger gets under way among China’s bike-sharers as cash runs out among also-rans

Changzhou Youon Public Bicycle System, the first of China’s bike-sharing applications to go public, has kicked off a much-anticipated consolidation in one of the country’s hottest industries as an unsustainable business model built upon burning cash claims its first victim.

Youon will take over Hello Bike, a one-year-old company based in Shanghai, according to an announcement on the company’s website that did not provide any financial details. Youon’s shares rose as much as 6.7 per cent to 75 yuan, the highest intraday level in two weeks.

China’s bicycle-sharing platforms, overcrowded by more than 40 services that have sprouted in a little over a year, have attracted US$2 billion in funding in the last year and a half, making it one of the most-invested industries for private equity, venture capitalists and angel investors. At the top of the pile are Mobike and Ofo, two Beijing-based companies each valued at more than US$1 billion, or unicorns in a field of smaller competitors.

“The clock is ticking for all of the smaller players to fight for the third spot, after Mobike and Ofo,” said Shi Rui, an analyst with independent research firm iResearch. “After years of red-hot competition, consolidation is inevitable.”

“Youon still lags behind in terms of dockless bikes, but it is cash-rich thanks to its recent listing, while Hello Bike leads the pack of second echelon,” Shi said.