Bike-sharing firms seek ways to stay afloat

Bike-sharing spells convenience, but the oversaturation of start-ups and price wars have made them unsustainable

Each morning, Ms He Xiaoyuan rides a shared electric scooter to the train station, hops on the train for three stops, before riding a shared bicycle to her workplace.

The entire journey takes the political researcher 40 minutes - about 20 minutes less than if she had to walk to and from the train station.

"Beijing is so big and many places are not close to a train station. These bikes have become a necessity for me," said the 32-year old.

The bike-sharing start-ups, and those offering personal mobility devices, have brought convenience to people like Ms He.

It explains why they took over the streets in Beijing in just a few short years after bike-sharing start-up ofo was founded in 2014 and Mobike a year later.

But while shared bikes were once hailed by state media as one of China's "Four Great New Inventions" - along with mobile payments, high-speed rail and e-commerce - much of that lustre has since worn off.

Mobike, which just two years ago declared its intentions to operate in over 100 cities globally, is withdrawing from its overseas markets, including Singapore; while ofo is now reportedly teetering on the brink of bankruptcy.

  • 235 million

    Number of users of shared bikes in China last year who largely use them for the last 3km of their commutes.

The two bike-sharing titans once spent millions in investors' funds on expansion, carpeting streets in China and beyond with their bicycles. But now, there are questions over whether bike-sharing start-ups have a future.

In recent weeks, the surviving companies have been scrambling to find a more sustainable way forward.

Hellobike announced that it would double fares in the Chinese capital - charging one yuan (20 Singapore cents) for a 15-minute ride now, instead of the previous allotment of 30 minutes - mirroring moves by Mobike and Bluegogo in recent weeks.

Analysts say the dust is settling on four years of cutthroat competition and price wars, a period when the billions invested in bike-sharing companies during the industry's nascent years fuelled hubris and an unsustainable business model.

At one point, China had over 70 bike-sharing start-ups, and industry pioneer ofo was reportedly ordering 600,000 bikes a month from one of its suppliers in Tianjin.

Orders skyrocketed in part because it was cheaper to replace damaged bikes with new ones than repair them when they malfunctioned. According to figures published by Xinhua, each bike costs about 1,000 yuan (S$201) to operate and maintain.

"The previous business model was too reliant on capital investments and it was not clear how profits could be generated," said Ms Sun Naiyue, an analyst from market research firm Analysys.

She added that current moves to raise prices are natural, given that the survivors have established a foothold and are now looking for a sustainable way forward.

But they would also have to improve the quality of their bikes, maintenance and recovery operations, said Mr Yang Guoying, an independent economic analyst.

"It's a process of streamlining their operations. They need to make profits. In the past, these companies were just throwing money at their problems," he said, adding that raising fares would be a first step.

While observers say there will continue to be a demand for such services - China had 235 million users of shared bikes last year who largely use them for the last 3km of their commutes - there are also questions over whether bike-sharing services can be profitable in and of themselves.

Investors had flocked to bike-sharing start-ups thinking they were the next Uber or Didi, both ride-sharing giants. But in truth, the two are very different, said Peking University's Professor Jeffrey Towson.

For starters, with the bikes that are needed to be put on the streets, it is a capital-intensive business.

And while it is a convenient and popular service, it does not translate to huge profits, said Prof Towson. He compared bike-sharing to a vending machine service in that while it is a "nice and convenient service, it might not make you a billionaire or a tech god".

Bike-sharing services might have to be bundled with others in order to be profitable, he added, pointing to Didi and how it has become a "mobility super app".

The Chinese ride-hailing giant acquired Bluegogo last year and now allows users to rent bikes through the Didi app, in addition to hailing a car or taxi.

"That may be the thing - bike-sharing may not make sense on its own, but it could be part of a suite," said Prof Towson.