Can bike sharing survive in China?

Mobike and others raise fees to save business following collapse of the once-leading Ofo

Sharing economy

Karen Chiu

Published: 10:02pm, 12 Apr, 2019

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This article originally appeared on ABACUS

The business of bike sharing is a tough nut to crack almost anywhere in the world. But nowhere is the industry’s rise and bust as dramatic as in China, where the number of startups have gone from more than 60 to a handful in the span of just three years. Can any of the survivors make it in the long run?

In the latest bid to turn around their businesses, Mobike, Hellobike and Bluegogo are all raising hourly fees to between 30 and 40 US cents, doubling previous rates.

(Abacus is a unit of the South China Morning Post, which is owned by Alibaba, a backer of Hellobike and Bluegogo’s owner Didi Chuxing.)

This may not seem that expensive compared with services in some places. Just take a look at New York’s Citi Bike, which costs a lot more at US$6 an hour. Rates have always been much lower in China, though, and now some Chinese customers say they might stop pedaling if the price hike continues.

One reason for this is that public transport is popular across China. Metro fares in Shanghai, for example, start at 45 US cents. Bus fare in Beijing can be as low as 30 cents.

“Everyone can go back to taking the subway,” wrote one Weibo user.

Some people said that they only use shared bikes on the last leg of their journey, after they get off public transit. In some places, though, there are cheaper bike sharing options. The southern city of Kunming runs its own fleet of docked rental bikes, which are free for the first hour.

Regardless of what customers think, it seemed inevitable that companies would have to raise prices sooner or later.

Rental fees remain the main source of revenue for these firms, according to Counterpoint research from last year, but it’s not sufficient to cover operating costs. When Mobike’s parent company Meituan Dianping filed to list on Hong Kong’s stock exchange last year, its IPO prospectus revealed that the company was losing a whopping US$2.3 million a day at one point.

Meituan Dianping: Settle all your local needs on one app

The most famous casualty in this war of attrition is Ofo. Once the market leader, the Alibaba-backed company has been facing a cash crunch since last year when it was believed to be close to bankruptcy.

News of Ofo’s troubles spurred droves of users to ask for their deposit money back, with lines snaking through several floors of Ofo’s Beijing headquarters. The CEO has reportedly been placed on a government credit blacklist.

Ofo is now practically out of the competition, which is good news for Mobike and the other bike sharing companies trying to soldier on. Whether any of them can win in this market, though, remains an open question.

Besides raising prices, Mobike is said to be reducing its fleet, likely to lower maintenance costs. Vandalism is a common problem in the business. Last year, thousands of shared bikes were salvaged from rivers during one cleaning operation in southern China.

Abandoned bikes from Ofo and Mobike seen in downtown Beijing in March 2018. (Picture: Simon Song/SCMP)

Perhaps in the near future, gone will be the days of bright-colored shared bikes strewn across every Chinese street corner. This would mean less wastage and congestion, but it’s also less convenient for consumers hoping to find a dockless bike wherever they happen to be.

Some users already say they will quit using shared bikes if they are forced to use fixed docking stations.

“It’s a real hassle to have fixed docks. It would be great if everyone could just park their bikes on one side of the road, but there are simply too many rude people who leave the bikes everywhere,” commented one Weibo user.

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