- One of the hottest sectors of Chinese tech is “dockless-bike sharing.” The two primary companies, Mobike and Ofo, have expanded aggressively in recent years across the world.
- Both companies have faced unforeseen challenges upon trying to enter the US market.
- While in China, I got a chance to use Mobike and Ofo extensively and it became apparent to me why the companies are having such trouble.
- Both companies rely on dense urban areas and heavy ridership to stay profitable, their bikes are uncomfortable to ride for anything more than a 5-10 minute ride making them unsuitable for more spread-out US cities, and Americans are much less likely to tolerate having bicycles resting on footpaths and alleyways, which is necessary to make the service convenient.
Over the last years, one of the hottest sectors of Chinese tech has been “dockless-bike sharing” startups. Billed as a kind of Uber-for-bikes, the companies allow users to rent GPS-enabled bikes with their smartphones for a few cents per ride, and then park them wherever when they are done.
A fierce bicycle-sharing war has ensued over the years. The streets of Chinese streets are littered with the bicycles of other startups trying to cash in. In total, Time reports that there are around 60 companies putting between 16-18 million bicycles on Chinese streets.
The top two companies, Mobike and Ofo, handled more than 50 million rides per day in 2017, according to the New York Times.
Entrenched in a fierce tech war, Mobike and Ofo began expanding globally last year to bring bike-sharing to the rest of the world and escape China’s crowded bicycle-sharing market.
By mid-2018, Mobike has expanded to 15 countries and 200 cities while Ofo has expanded to 20 countries and 250 cities. Their markets span the United Kingdom, Mexico, Australia, France, Italy, Japan, Russia, and, of course, the United States.
The expansion to the US has been fraught with problems. As of March, Mobike had launched in only 5 US cities. Meanwhile, Ofo had launched in 30 markets. But last week, both Mobike and Ofo announced that they would pull out of Washington D.C. and Ofo announced that it would shut most US operations so it could “prioritise growth in viable markets.”
On a recent trip to China this past spring, I got a chance to use Mobike and Ofo extensively. It became apparent to me why bike-sharing, at least as it exists in China, won’t work in the US.
Here’s what it’s like to ride Mobike and Ofo:
Mobike and Ofo handle more than 50 million rides per day in China. You can find their bikes lined up just about anywhere in a major Chinese city. This accessibility is the core sell-point for the bikes. Rather than walk the half-mile from the metro station to the office, just bike.
It works incredibly well in China, where metros are convenient, but are generally not extensive enough to reach all parts of a city. In my six weeks in China, I found that I was constantly getting off the metro in Beijing, Shanghai, Shenzhen, or elsewhere to find that I was about a 15-minute walk from my destination. Perfect for a Mobike or an Ofo.
But that kind of accessibility and convenience requires two things: a huge fleet of bikes and a huge workforce to spread the bikes to the most needed areas. It works in China because there is a large, cheap labour force and an absolutely massive urban population that likes riding bikes. China has 100 cities with a population over 1 million and is expected to have 221 cities of that size by 2025. The US currently has 10.
It also helps that the bicycle-sharing industry has received a ton of support from the Chinese government in the form of tax breaks and free office space. Xinhua, the state-run press agency, has hailed bike-sharing as one of China’s “four great new inventions.” A flood of venture capital funding from Chinese internet giants Alibaba and Tencent has followed. The rush towards bicycle-sharing does have some downsides — like the bicycle graveyards that have sporadically popped up in Chinese cities.
What makes bike sharing so incredible in China is that there are so many users — bicycle riding has a long history in the country once known as the “bicycle kingdom” — that Mobikes and Ofo bikes can be found just about anywhere. Like this random underpass in Shenzhen.
When I opened up the Ofo app in Shenzhen, the map was littered with bikes in any area, at any time of day. The largest bike-sharing fleet in the US is Citibike in New York City. While it’s not dockless, it has a fleet of 12,000 bikes, but it’s just about impossible to find a Citibike in the far areas of the city and difficult even in popular neighbourhoods like the East Village. Not the case in China.
You unlock the bike by scanning a QR code. It’s nifty and easy. The Chinese government reports that the country has 400 million registered bike-sharing users — more users than the US has people — and 70 million daily riders. Such a huge user-base allows economy of scale that doesn’t exist in the US.
Source: People’s Daily Online
Some of the Ofo bikes unlock automatically when you scan the QR code. Others will give you a four digit code to input after you scan.
The Ofo bikes are flimsy and — I hate to say it — feel cheaply made. This is a mass-produced bike, meant to take a beating. That raised another issue for me: While I can see a use-case for a bike like this in New York, where it’s conceivable that the only distance you’d want to travel is three-quarters of a mile or less, I’d hate riding it in more spread-out cities like Dallas, where a bike-sharing war has ensued due to more lax regulations. This is not a bike you can ride for even a few miles.
Source: Wall Street Journal
Until recently, China had extremely lax regulations on bike sharing. That led to a mess of cluttered footpaths that would be unthinkable in the US. While local governments have begun to rein in the industry, the free-for-all helped establish the habit of using the bikes in the first place. Even with more explicit parking areas for bikes, like this one in Shenzhen, Americans are unlikely to adapt well to city streets and footpaths that look like this. If you have any doubts, recall the footpath panic that ensued this past spring when Bird scooters first showed up in California cities.
Still, you have to admit its convenient. There’s always a place to park the bike (of course) no matter where your destination is. Only once, when I was walking into a luxury mall, was I asked to park my bike in a different location.
Another major hurdle in the US is that Americans are used to driving. Convincing them to ditch their cars is all but impossible without offering a more convenient alternative. In Dallas, which had a critical mass of bike-sharing bikes with over 200,000 on the streets, most were not often used, Ryan Rzepecki, the CEO of electric bike-sharing startup Jump Bikes, told Reuters in March.
A few days after my Ofo ride I decided to give Mobike a try. In Beijing, as many cities, you can find bikes from most major bike-share companies on every corner.
Like Ofo, Mobikes are everywhere. Rides for both services are incredibly cheap. Even my longest ride on either service was less than $US1, without any kind of membership. Compare that to Citibike, which requires a $US12 day pass or a $US15-a-month membership.
The Mobike also unlocked with a QR code. Honestly, it’s hard to tell the difference between the two services. Their apps and bikes are practically identical aside from the different colours. A major reason bike-sharing is so cheap in China is the same as why companies like Tencent and Alibaba are pouring in money: It’s all about the data.
Chinese tech centres on ecosystems more than the US. Alibaba and Tencent offer an array of services that rely on interconnected data for each user. Mobike and Ofo provide an opportunity to gain a ton of data on user’s commuting habits and rental history, as well as increase use of their backers’ mobile payment apps, AliPay and WeChat Pay. The data is also being used for Tencent and Alibaba’s credit scoring services. Without that huge incentive, venture funds in the US are either burning a ton of money for less payoff or need to raise the price to make it more profitable, which likely eliminates some of the incentive for users.
And, let’s be honest: The bikes are kind of crappy. Most of the bikes I had were either rusted out, had loose handlebars, or a seat that was stuck too low. I can’t possibly imagine riding it for a few miles down even flat Los Angeles streets, let alone across San Francisco’s hills. But for the half-mile from the metro station to my hotel in Beijing, it was fine.
I parked the bike behind the hotel next to a few other bike-share bikes. It was there the next morning. While Mobike has a big enough fleet in Beijing and enough venture capital to deal with a bike sitting unused for an entire day, the fleets and userbase are much smaller in the US, making it a much bigger problem when even one bike goes unused.
To end a ride, you simply slide the lock in place. Some bikes require you to tap on the app that you finished a ride, while others will recognise that you locked the bike.
The price is minimal. It’s a no-brainer when the bikes are everywhere and you are going short distances. But raise the price to a few dollars a ride, as will likely be needed in the US to compensate for the smaller economy of scale, and it suddenly becomes too expensive to be worth it.
Over the last year, a number of dockless vehicle startups have popped up in the US like Bird, Uber-owned company Jump Bikes, and Lime. It’s telling that all three are powered vehicles, rather than simple bikes. Bird is electric scooters, Jump is electric bikes, and, while Lime originally started as dockless bikes, the company has increasingly moved towards electric bikes and scooters. The shift solves the problem of the US’s hilly, spread-out cities, which will likely help build a bigger user base.
Some of the aforementioned reasons are clearly behind Ofo’s announcement last week that it would shut most US operations. Ridership in many cities was reportedly well below what was needed to break even, former Ofo employees told The Wall Street Journal, and Ofo’s statement obliquely referenced US regulations. The announcement came just months after the company said it wanted to reach 300,000 bikes in the US by the end of 2018. One has to wonder if Mobike, which announced last week it was leaving Washington D.C., will soon follow suit.
But, at the end of the day, I’m sceptical those companies won’t run into the same issues as Mobike and Ofo: regulations, economy of scale, and Americans intolerant to footpaths littered with vehicles.
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