Going global, bike sharing faces uphill ride

 

Cartoon by Liu Zhiyong; Poem by Long Yuan

 

In Chinese cities, bike sharing has become a trend,
On city sidewalks, a sea of bikes that never ends.
Cutting gridlock and saving a portion of your salary,
It’s a low-cost journey that also burns calories.
No wonder it’s the hottest form of transportation,
New companies are springing up across the nation.
When expanding overseas,
Chinese startups need to mind their Qs and Ps.
They must balance convenience and order,
If they hope to expand beyond China’s borders.

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Last year, an unmissable fleet of fluorescent orange, canary yellow and ocean blue bicycles hit the streets of urban China. While multiple bike-sharing companies are fiercely competing for domestic market share, two of the biggest, Mobike and Ofo, have expanded their services overseas. China has become a world leader in bike-sharing programs.

However, Chinese startups are encountering a different regulatory environment abroad that may prevent them from experiencing the kind of feverish growth they have come to know in China.
In Singapore, local transport authorities have reportedly expressed caution over the development of the industry in the country and are adopting a wait-and-see approach.

In the United States, before the Beijing-based company Bluegogo started to deploy their bikes in San Francisco, the local Municipal Transportation Agency wrote a letter to the company’s CEO, demanding it follow the laws and acquire business permits for parking the bikes.

 

Domestic popularity
Since Uber China, the regional subsidiary of the car-hailing app juggernaut, merged with Didi Chuxing, its biggest and most formidable rival in China last year, station-less bike sharing facilitated by mobile apps has become a cash cow for domestic enterprises.

In only one year, more than 20 bike-sharing companies have opened in China while Mobike and Ofo have reported receiving hundreds of millions of yuan in financing. This year, free ride advertisements are all over social media. Mobike and Ofo announced that they have each put more than 1 million cycles on the streets. Given their ubiquity on Chinese sidewalks, the number may not be an exaggeration.

In fact, the number of bicycles one startup put on the streets has surpassed that of public bikes in all other countries across the globe combined.

This figure is expected to rise tenfold to 20 million units this year, equal to last year’s total sales in the domestic market, according to the China Bicycle Association.

China was known as the “Kingdom of Bicycles” in the 1980s, and it is possible that bike sharing is about to make two-wheel transportation fashionable again.

A Penguin survey of more than 6,000 smartphone users found 48.7 percent said they prefer using shared bikes for short trips, and almost 60 percent said shared bikes are a better choice for transportation.

Though the industry is booming in China, bike sharing is less common abroad, which has encouraged Chinese startups to dabble in the overseas market. In the early 2017, Mobike, Ofo and Bluegogo started trial operations of bike-sharing programs in Singapore, then the United States and the United Kingdom.

 

Overseas market
Germany launched the first station-less bike-sharing program in 1998, but it failed to take off. In 2007, a bike-rental system using docks was successful in Paris, largely promoting the development of public bicycles. By the end of 2016, the number of bike-sharing systems in the world had reached more than 1,000.

However, bike sharing is not that popular in the United States. In 2010, there were only 1,900 shared bikes and large-scale promotion did not start until 2013. As of 2016, only 55 cities in the country have public bike-rental system, with a total of 42,000 bikes and 77,000 users per day.

In 2010, New York City launched a pilot project of smart station-less bikes, but its growth lag far behind China. Today, there are only some 5,000 station-less bikes in the US, accounting for 13 percent of public bikes. It seems that American cities value public order much more than convenience.

In Portland, there are docked and station-less bikes. The city concluded that both systems have pros and cons. For example, docked bikes are more orderly and have fixed parking locations, making them easier to find, whereas station-less bikes easily tempt users to carelessly park them and disrupt public order. It is also worth noting that the labor costs for restoring parking order with station-less bikes is quite high.

All in all, compared to China, the demand for bike sharing is limited in the US. However, the market has enormous potential as well, which is why Chinese bike-sharing startups are rushing to grab a market share.

In the meantime, Singapore is also a favorable market because it is a developed economy with a sound infrastructure as well as transparent laws and regulations. Singapore also has one of the highest rates of smartphone ownership in the world, making it attractive to bike-sharing companies.

 

Testing the waters in the US
In November 2016, the smart bicycle brand Bluegogo was launched. In early January of this year, it announced that it had received 400 million yuan in financing from investors, and its company value totaled 1 billion yuan. In four months, Bluegogo released a total of 235,000 shared bikes in Chinese cities.

Though it entered the market later and is smaller than Mobike and Ofo, Bluegogo was the first to test the waters of the US market. 

After hearing rumors that Bluegogo was about to introduce shared bikes to the city, the heads of the San Francisco Public Works and the San Francisco Municipal Transportation Agency, the two city agencies with most oversight over bikes and city streets, warned Bluegogo CEO Gang Li in a letter that his company has no legal grounds to expand into San Francisco under its current business model.

Public Works and SFMTA warned Bluegogo that the agencies have a duty to protect the public against hazards and other obstructions to the public right of way.

In response, Bluegogo said the company is willing to work with the city and adjust its business model accordingly to make sure bikes will not obstruct traffic on sidewalks.

Afterward, Bluegogo rolled out a soft launch, with 15 private rented parking lots and about 200 shared bikes. Officials called the company’s move a good “first step.”

Though Bluegogo managed to ease the tension with city officials with a soft launch, the station-less program turned into a docked system, making the model much less convenient.

However, objectively speaking, the pushback Bluegogo encountered was by no means discrimination against Chinese startups. Local bike-sharing firm Spin also faced the same hurdle, and it has moved to another tech center Austin for trials, but it is still struggling. On March 11, it announced on Twitter that it would temporarily suspend services until further notice.

Despite the setbacks, Chinese bike-sharing startups have ambitious plans to expand across the Pacific.

The company is in talks with at least five more unspecified US cities about introducing its bike-sharing scheme, said Ilya Movshovich, vice-president for Bluegogo US operations.

In addition, both Mobike and Ofo displayed their bikes at the South by Southwest conference in Austin, Texas, this month. It is reported that Ofo wants to introduce a fleet of 50,000 shared bikes in about 10 US cities by July this year.

 

Cautious start in Singapore
Early this year, Singapore startup oBike, applied China’s bike-sharing business model and put thousands of shared bikes in Singapore. It charges 1 Singapore dollar for 30 minutes and requires a 49 Singapore dollars as a deposit.

Less than two weeks later, Ofo joined the competition and launched 1,000 shared bikes. It charges users half oBike’s rate.

It is reported that Mobike will officially launch shared bikes in Singapore in late March.

The brutal competition is about to start, but the main question is whether the “saturated launch” plus “drop off wherever you want” strategy that bike-sharing startups applied in China can be copied in Singapore.

On the one hand, “saturated launch” will greatly improve convenience, making bicycles a competitive mode of transportation. On the other hand, the prerequisite for “saturated launch” is “dropping off wherever you want” or free parking. If parking is to be charged, it will largely increase the operating cost, which eventually reduces convenience.

To conclude, China is a big manufacturer, but a bike-sharing model, to an extent, is the promotion of culture and services, which falls under the preview of soft power. Fundamentally, the dispute is a balance between convenience and order. So it is bound to be challenging, considering that China and the targeted countries are not synchronized in the level of development and have different values.

It is evident the culture and value export will be more difficult than selling “Made in China” products. If we can pull this off, the implication will be significant.

 

Su Kui is from the Liaowang Institute and an expert on transportation studies.