We keep reading about the bike-sharing phenomenon spreading globally. We decided to shed some light on bike-sharing: how it all started, who are the big players in the industry, the opportunities, challenges and how we see this industry developing in 2018.
Why It All Started
Two leading Chinese based companies first introduced the bike-sharing phenomenon, Ofo, and Mobike in 2014 and 2015 respectively. Bike-sharing has enabled riders to reach their destinations in a fast, cost-effective, and fun way. Despite the modernization of major cities, increased income for consumer spending, and an increase in car ownership by many Chinese citizens, traffic jams and congestion on roads have proven to be reason enough to enable the adoption of biking trends for millions of individuals. Since its inception, bike-sharing has become the primary way to commute to work, visit friends and participate in other outdoor leisure activities.
The First Entrants & Key Players
Ofo – first introduced at Peking University as a means for college students to get around more efficiently. Founded in 2014, Ofo currently stands at more than 10 million bikes, 5.1 daily million users in 250 cities with a presence in over 20 countries. Also, Ofo has expanded rapidly in North America making its presence felt in 12 U.S. cities – the number that’s estimated to grow to 100 by next year.
Mobike – founded in January 2015, initially serving the Chinese market has then expanded as a service to new markets with 200 million registered users across 180 cities and over 4.9 million active users.
These two companies currently represent 95% of the Chinese bike-sharing market, each backed by more than half a billion dollar investment by two giant Chinese conglomerates, Tencent and Alibaba; ultimately setting their goals to expand into the international market. With a considerable hype, the bike-sharing sector in total has attracted more than 2 billion dollars in venture funding over the past 18 months and is expected to continue producing new companies and innovation.z
How Bike-Sharing Works
The bikes are genuinely dockless, meaning that they can be dropped off and picked up at any location with a GPS tracker in each bike. The bike is located and released by downloading and registering in an app where a QR code is scanned with a user’s phone unlocking the bike and riding to their destination.
Being economical and efficient are just two of the main reasons why individuals cannot get enough of bike-sharing. These bikes cost roughly $0.14 (0.5 Yuan) for half an hour, typically cheaper than any train fare, which costs approximately $1-$3 for a 30-minute ride. Thousands of bikes are at the ready in any major city, helping commuters not have to travel very far from where they are located to pick up a bike and start commuting.
Not a Rose Garden
While the dockless bike phenomenon offers many opportunities ranging from efficiency to the reliability of these bikes, there are some possible challenges to overcome – the main one being the oversupply of bikes with users dumping broken bikes into piles on the street; many bikes get misused.
In China alone, bikes are left on sidewalks. You can even see bikes piling up on top of each other, creating what China calls the “bike graveyard.”Australian riders have similar habits as well with authorities finding these bikes snapped in half and even left floating in various rivers when users are finished with them. Secondly, city regulations have posed challenges as well with companies having to register with the municipality to approve the outpour of shared bikes in the city.
Lastly, smaller companies trying to penetrate this vertical have run into problems of having to invest a hefty sum of money. Shared bikes are labor intensive with parts having to be fixed due to the lack of rider’s responsibly and of course the production of bikes themselves. Just as fast as the project ramps up, that’s how quickly the company seems to fizzle out.
So, What Do We Think Will Happen This Year in Bike-Sharing?
- Further Global Expansion – The expansion of bike-sharing apps into new cities and countries has already started and is expected to increase even more in the coming year. Such development is anticipated to continue by the leading companies, Ofo and Mobike, in addition to new entrants. This expansion will have a global reach – from North America, South America and Latin America to Southeast Asia.
- Market Correction & Consolidation – With the two big, experienced and heavily invested companies on the market, it does not leave much room for other smaller services to grab hold of the saturated market at hand, resulting in companies currently shutting down, laying off hundreds of employees in the process.
This trend is expected to continue in 2018. The competition between Mobike and Ofo in the coming year will become even more fierce with the key players edging out layers for more refined operations and maintenance while expanding overseas to low-tier markets, offering strategy and advanced products.
- Ride-Hailing + Bike-Sharing – The integration of bike-sharing apps and ride-hailing allows for collaboration between the two; enabling users to book a taxi or locate a bike on one platform. Chinese ride-hailing giant, Didi Chuxing, has already begun integrating Ofo into their product and is looking to launch its own branded service soon. Uber, Lyft, and other international companies are prime candidates to incorporate bike-sharing into their already existing client base. The Indian Ola has already added Ola Pedal as an added feature to their ride-hailing app.
We expect the bike-sharing vertical to continue making headlines highlighting new product innovation, investor interest, and global expansion in 2018.
If you would like to hear more about this fascinating trend, contact us.