China's bike-sharing frenzy has turned into a bubble

Bike sharing in China highlights hurdles of doing business

China’s bike-sharing companies have hit a roadblock.

The industry boasted close to 60 startups as recently as 18 months ago, according to Yu Xue, an internet research analyst at IDC China. He predicts fewer than 10 will survive the next year.

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The companies allow customers to unlock a bicycle using only a smartphone, ride which around town, along with then leave which at their destination. The style works, nevertheless the industry has grown too big too fast.

The proof is actually scattered across China’s urban sidewalks, where piles of underused bikes have been dumped. Complaints have even prompted authorities to limit the number of bikes in some cities.

A cull is actually at This specific point underway, with several firms already having gone out of business. Others have been forced to merge as funding becomes scarce.

Xue said which’s difficult to track the scale of the damage, because many of the startups close their doors quietly along with without much warning.

“The growth rate of bike-sharing users is actually slowing down,” said Zha Songcheng, vice president of Hellobike, which claims to be the third largest bike sharing company in China.

Money has also largely dried up. Bluegogo, which claimed at its peak to have 20 million users along with over 0,000 bikes, cited a lack of funding among the main reasons which handed over operations to a rival firm in November.

“Since the very first day, we have been on the ice,” CEO Li Gang wrote in an open letter. “I went to hundreds of funds, received numerous praise … nevertheless none of which was translated into money.”

china bike sharing 1
Rented bicycles via bike-sharing firms sit near the entrance of Xiashan park in Shenzhen, Guangdong on January 16, 2017.

As companies fold, some customers have reported trouble getting their rental deposits back. Shuting Wang, a 25-year-old management consultant in Beijing, says she lost approximately 0 yuan ($30) to Bluegogo.

After trying along with failing to retrieve her money, Wang said, she became wary of leaving deposits with bike-sharing firms.

“which’s too risky,” she said. “Some people take the bikes home along with sell which online because they can’t get their deposit back.”

Bluegogo did not respond to multiple requests for comment.

Last week, Mingbike became the first Chinese bike-sharing firm to be sued over its failure to refund deposits, according to local media.

china bike graveyard
An aerial view of shared bicycles, collected by police after they blocked pavements, abandoned on a field in Hangzhou.

Related: China’s ‘dockless’ bike sharing could be coming to a street near you

China’s Ministry of Transport announced last month which which would likely clamp down on the sector to “protect customers’ interests along with put the industry in a healthy along with orderly track.”

Angela Cai, the communications chief at major industry player Ofo, said which more regulation could help quell an “industry bubble.”

She added which some companies “will be squashed out.”

china bike sharing 4
A mechanic via Ofo stands amongst damaged bicycles which were pulled off the streets along with kept at a repair depot in Beijing.

Two firms have a major advantage over the rest: Mobike is actually backed by tech giant Tencent, along with Ofo has e-commerce heavyweight Alibaba in its corner.

They control a combined 0% of the market, according to Xue. Both are valued at more than $1 billion, giving them war chests which smaller firms just don’t have.

The financing power of the some other players is actually not strong enough,” Xue said.

Related: which’s a make-or-break moment for U.S. bikeshares

Ofo along with Mobike say which their goal is actually not profitability, nevertheless greater scale along with branding. along with while cash-strapped startups struggle to survive, they are worried about keeping up with expansion.

“[The] challenge is actually hiring,” said Cai, noting which Ofo recently hit its goal of reaching 20 countries along with 0 Chinese cities.

Luke Schoen, a spokesperson for Mobike, said the company’s emphasis on cost management had allowed which to thrive “while some other players struggle.” Mobike launched in 150 cities along which has a dozen countries in 2017.

china bike 5
Commuters ride shared bikes during rush hour in Beijing.

Reports of a potential merger between the industry leaders have circulated for months, a scenario which Xue says is actually “highly possible” at some point. Mobike said which has “no plans” to merge, while Ofo declined to comment.

Smaller players are at This specific point trying to pivot to what they say are more sustainable business types.

Hellobike has made a recent push into shared electric mopeds — 60,000 of which have been deployed so far — as a way to reduce its reliance on bicycles.

Hellobike along with Mobike are also considering moving into car-sharing, while Ofo says which might not even be a bike-sharing company by 2020.

“which would likely be a big sharing platform,” said Cai. “We are hoping along with realizing which end goal.”

— Serenitie Wang contributed to This specific report.

sy88pgw (Hong Kong) First published December 29, 2017: 4:44 AM ET

China's bike-sharing frenzy has turned into a bubble

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