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China technology

Mobike to go deposit free amid slowing market and growing competition

Competition in China’s bike-sharing scene has intensified along with pressure to turn a profit

PUBLISHED : Thursday, 05 July, 2018, 3:55pm
UPDATED : Friday, 06 July, 2018, 9:10am

Mobike, the China bike sharing firm owned by Meituan-Dianping, said on Thursday that users no longer need to pay deposits to rent bikes and it will refund those who have already paid them, amid growing competition and moves towards deposit-free services by rivals.

Previously Mobike customers were required to pay a 299 yuan (US$45) initial deposit to start using the company’s dockless bicycles. Mobike’s announcement comes four months after its rival, Ant Financial-backed HelloBike, said users with a score of more than 650 on Sesame credit, a social credit system developed by Alibaba affiliate Ant Financial, no longer need to pay deposits.

Competition in China’s bike sharing scene has intensified with dozens of participants now effectively whittled down to a game of three main players. Beijing-based Ofo and HelloBike are backed by Alibaba Group and Ant Financial respectively while Mobike was initially funded by Tencent before being fully acquired by Meituan for US$2.7 billion in April. At stake is an industry that is potentially worth about 24 billion yuan (US$3.8 billion) by 2019, according to market research firm iResearch.

A Mobike spokeswoman could not be reached for comment immediately.

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HelloBike mainly operates bike sharing services in China’s second and third-tier cities, processing about 20 million orders per day, it says. The company received a fresh cash injection of 2 billion yuan (US$301 million) from Ant Financial last month. Meanwhile Ofo cancelled deposit-free tests two months ago based on Sesame Credit in China’s 20 cities, saying it would begin to “develop a credit system of its own.”

An Ofo spokeswoman could not be reached for comment immediately.

China’s bike sharing industry is expected to slow this year. The number of bike-sharing users in the country is forecast to grow 14.6 per cent in 2018, a steep drop from growth of over 600 per cent in 2017, according a report by iiMedia, a China-based market research firm. In May, Ofo’s daily active users reached 7.3 million, Mobike’s 6.2 million, and HelloBike had 114,300, according to iiMedia.

None of them have been able to turn a profit yet, meaning bike-sharing companies will have to rely on fresh capital injections to sustain operations. The bike rental industry in China has also come under pressure recently as dozens of Chinese cities including Beijing, Shanghai and Shenzhen, have barred companies from putting more new bikes on the streets to avoid widespread traffic congestion.

Alibaba is the parent company of the South China Morning Post.