That China’s burgeoning tech industry harks back to America’s dot-com maelstrom of the 2000s is a point that is hard to disregard. Companies emerge and vanish in a flash, all of them eyeing sweet spots alongside recent mega-stars like Didi, Meituan
One sore that has not healed is bike-sharing. Dubbed one of China’s New Four Great Inventions it turned out all but a disappointment in just two years after the industry pioneer ofo took its operations outside university campuses and flooded China’s streets with flashy yellow two-wheelers. You might be familiar with this flawed scenario if you have been following the ups and downs of the American dockless scooter companies. However, when it seemed like we were about to hear the eulogy to the troubled industry, Meituan
Beijing’s bike-sharing palette is very different today compared to what it looked like just a year ago. Meituan
In late August, the Beijing Transportation Committee released a message saying that Didi and Meituan
In late 2017, ofo had 23 million bicycles in China and Mobike was catching up. Experts warned these companies of the necessity to downsize to turn a profit, but instead only saw more bikes appear on the streets. Desperate to seize the market, start-ups (especially ofo) were burning through cash and not earning anything in return. By December, this ill dynamic started bothering not only industry pundits but customers as well. Worried that the companies might go bankrupt, users rushed to withdraw their $30 deposits.
While on paper the deposits were collected as a security against damaged bikes, in reality they served a different purpose. It is likely that the companies were reinvesting the money or using it to fund their operations, which was something out of a legal gray area. Naturally, the wave of deposit withdrawals threw the start-ups into a frenzy. Mobike swiftly sold out to Meituan
The new industry patrons took a more thoughtful approach to the business, incorporating bike-sharing into their growing ecosystems, reconsidering the pricing strategies and, most importantly, the purpose of cramming the streets with flocks of two-wheelers.
“If an industry has very limited profit-making channels, even those who can survive may not be able to operate independently. Individual platforms have to merge in order to build an ecosystem that can expand their profits,” said Professor Timon Du of the Chinese University of Hong Kong (CUHK) Business School.
Bike-sharing’s profit-making channels were extremely limited. Per-ride charges were not doing much for the companies’ bank statements, given the costs of producing millions of bikes and the discounted ride fairs. ofo tried to tackle the problem by leasing their bikes to advertisers, but it did not help unfortunately.
In order to make bike-sharing worthwhile Meituan
Apart from that the new vertical dominators have more sophisticated agendas. For the Hong-Kong-listed Meituan
For Didi, bicycles solving the “last-mile” problem are part of a clear attempt to dominate China’s mobility industry and become the all-in-one solution for multimodal transportation. The company already dominates China’s ride-hailing market and excels in autonomous driving. Now it’s aspiring to own the short-distance travel segment, too.
The bike-sharing industry has been on a roller-coaster ride for the past several years, but is now showing inconspicuous signs of finally coming into its own at the hands of bigger and more experienced backers. Meituan