Bike Sharing with Chinese Characteristics: Possibilities for International Expansion

Walking through the streets of major Chinese cities, one cannot miss the throngs of identical bikes all over roads and sidewalks. Any passerby will without a doubt see names like Mobike, Ofo, Xiaoming, and at least a dozen more speeding through bike lanes and parked on sidewalks all over China. Over the past year, these companies have collectively come together to form a new phrase that has become common across Chinese households: the bicycle sharing economy.

A Uniquely Chinese Model

Bike sharing has taken off globally in the past decade. However, China’s bike sharing schemes depart from American and European systems in a few key ways. First, most Chinese bike sharing companies are private, while many American and European cities sponsor public municipal bike sharing systems. Some national governments like the Netherlands have even organized nation-wide bike sharing schemes. Second, rather than swiping a credit card at a dock, customers use their cell phones to unlock bicycles by scanning each bike’s unique QR code.

The biggest difference, however, lies in the way customers utilize the companies’ services. Most Chinese bike sharing services do not rely on docks where customers can find and park bikes. Rather, a GPS-system enables bikes to be retrieved and dropped off anywhere, allowing users much more freedom in their use of shared bicycles.

In the coming years, these key differences have the potential to allow Chinese bike sharing companies to export the dock-less model outside of Asia; some have already begun experimenting with international expansion. The model’s domestic success has made the bike sharing market just as attractive for foreign investors as the Chinese ride-hailing market, as they search for the two-wheeled version of Didi Chuxing. Bike sharing clearly has the potential to become the next successful industry in the world’s largest and fastest growing market to find itself on the brink of international expansion.

How Bike Sharing Took Off Across China

Bike sharing in China became a billion-dollar market in China nearly overnight, with the industry virtually non-existent just two years ago. Mobike and Ofo, the two largest bike sharing companies, both went through Series A rounds of venture capital funding in 2015. Other companies joined the financing battle the following year and continue to emerge, according to data compiled by iResearch Consulting Group. With rides costing as little as 1 RMB (about 15 American cents) for a 30-minute ride and frequent promotions to attract users, the market quickly took off in China’s bike-friendly culture. Indeed, China was ripe for a bike share boom following the implementation of policies, especially in urban areas, that make it both difficult and expensive to own a car. These policies include limits on days of the week that certain license plates are eligible to drive, and restrictions on residents’ abilities to park or even purchase a car.

While New York City’s bike sharing scheme attracted 50,000 daily rides on average during May, Mobike and Ofo combined complete an average of 50 million rides each day. Differences in scale of the populations and geographic ranges help explain the huge disparity in these numbers, but the sheer amount of daily completed bike share rides in China speaks volumes to the industry’s growing popularity.

Currently, Mobike and Ofo continue to lead the pack. Over the summer, the companies raised a combined $1.3 billion, cementing their position as market leaders. They now have financial backing from both major Chinese and foreign firms: Mobike boasts backing from Tencent and Sequoia Capital, while Ofo has attracted financing from Alibaba and Didi Chuxing (China’s largest ride-sharing company). They also each claim over 100 million users, and have spread a combined 12 million bikes throughout Chinese cities. For now, China has continued to exhibit a market-friendly attitude toward bike sharing expansion and, according to iResearch, the overall industry’s revenue reached nearly $600 million in 2017 Q2 alone.

Challenges to Growth, Possibilities for Expansion

Although the market is expected to continue to grow over the coming years, it faces a few major challenges to sustainable growth further into the future. Many bikes suffer from vandalism and improper care and an excess of bikes has also created massive pile-ups on sidewalks—blocking access to pedestrians and sometimes traffic. The maintenance costs that have become associated with bike sharing have also raised debates over how bike sharing reflects a weakening sense of morality and care for other people and property in Chinese society. However, firms like Mobike hope to mitigate the issue through incentives to care for bikes and report damaged bikes. Users face punishments from seeing their account locked to being charged fines for damaging bikes or parking them in unsafe or private places.

Another challenge that ease of access to the bikes has created is increasing safety concerns. Since the explosion of the bike share market, two children have been killed on Ofo bikes and ten more have been injured. In July of 2017, the family of a child who died in an accident while riding an Ofo bike sued the company for financial compensation. Finally, bike manufacturers in China fear that if the bike sharing bubble bursts, China will be left with an unmanageable surplus of bikes that will hurt the manufacturing industry.

These challenges, however, have not thwarted ambitions to expand internationally. In the past few months, Mobike has launched in the United Kingdom, unleashing bikes in Manchester and the Ealing borough of London. Ofo has also eyed international expansion, launching in Cambridge in the United Kingdom and Seattle in the US. In September, it also launched in the Hackney borough of London, where Mobike and Ofo now compete with a traditional docked-bike scheme.

While representatives from both companies are optimistic about the expansion, some cities have proven reluctant to welcome dock-less bike sharing schemes. New York City’s transit authority issued a cease-and-desist letter to a local company that had staged a dock-less bike sharing demonstration in a neighborhood of Queens. Within Asia, Mobike and Ofo have also had trouble gaining traction among local users in Singapore, failing to break into the most downloaded apps on the country’s app store.

One crucial reason why Mobike and Ofo found it difficult to take off in Singapore was the presence of strong local competitors like Obike. This might prove to be a barrier for expansion elsewhere around the globe as well. For example, Mobike and Ofo both launched in Washington, DC in October – their launch coincides with the DC expansion of American and California-based bike share companies Spin and LimeBike. The Chinese companies will have to carefully study the American market and its differences with the Chinese market in order to successfully compete with local companies starting off with a more thorough understanding of American consumer habits.

Addressing challenges the company faced in China, Mobike expressed hopes to grow more sustainably abroad than in China by working closely with local governments in cities globally. Mobike’s VP in charge of international expansion contrasted the firm’s strategy with that of ride-sharing companies like Uber, which “subvert local government” in an interview with the Washington Post. However, only time will tell if this bike sharing model with Chinese characteristics proves able to be exported abroad.

Andrea Moneton is a senior at Georgetown University. Contact her at asm252@georgetown.edu.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s