Foxconn to make smart bicycles for Mobike’s sharing service

Foxconn Technology Group, the world’s largest contract manufacturer of consumer electronics, will become the exclusive assembler of smart bicycles for Mobike, in a venture that aims to double the Chinese bike-sharing company’s annual production capacity to 10 million units.

The joint supply chain, which will raise the annual production capacity by 5.6 million units, will significantly cut assembly and distribution costs globally, according to a statement by the two companies. Foxconn will take a strategic stake in Mobike, the statement said, without divulging financial details.

“In 2017, we aim to enable residents in 100 cities in China and around the world to enjoy our unique and convenient solution of last-mile travel,” said Davis Wang, Mobike’s co-founder and chief executive. “Foxconn is the ideal partner to support these ambitious expansion plans.”

The venture gives Mobike a leg up in grabbing market share against its main competitor Ofo, which is also eyeing an expansion abroad to exploit the better profit margins overseas, amid cut-throat competition at home.

Mobike and Ofo, both based in Beijing, are the two biggest among at least 17 Chinese companies that are now providing Uber-like bicycle sharing services across China, each one accessible via smartphone. That’s more than enough me-too service providers for the market, analysts say, which could mean an industry consolidation is on the way.

“They haven’t figured out what their monetization model is yet,” said Wang Xiaofeng, senior analyst with Forrester Research. “Increasing market size is an easier goal to achieve than monetization. When users number is big enough, the advertising money will come.”

Mobike has set its sights on expanding to Singapore, a densely packed, prosperous city state where a well-developed subway system displaces private car ownership.

Ofo is opting to dip its toes in the west, aiming to ship 20,000 China-made bicycles to the US and Britain.

Foxconn plans to locate its production facilities close to Mobike’s priority markets around the world, according to the statement. This will help Mobike cut its distribution costs, and enable the company to tailor its bicycles to quickly respond to specific customer needs.

The collaboration is another example of the potential of “smart manufacturing” driven by the internet, said Foxconn’s senior vice president James Du.

Mobike, which began a trial operations in Shanghai at the end of 2015, officially launched last April, and has since expanded to 13 cities across China. It’s locked in a fund-raising competition with Ofo, as venture capitalists are eager to bet on the next big thing in China’s trillion-yuan sharing economy.

Ofo is valued at US$500 million, according to Bloomberg’s report.

Mobike announced earlier this month that it had closed a $215 million Series D financing round, led by strategic investors including Warburg Pincus and Tencent Holdings, operator of China’s largest social network.