5 oct 17

Chinese shared bicycles to cross the Indian border

One of the most surprising things that a visitor to Beijing learns about China, is how much the Chinese love to ride bicycles, scooters and motorcycles. In an overcrowded city where traffic is slow, 2-wheelers are the best option to travel around, deliver food or Alibaba (the Chinese Amazon) orders. On top of that, bicycles are emission neutral and so are the massive amount of electrical bikes and scooters that are so popular in the Chinese capital.

Buying a bicycle, a thing of the past

However, people don’t buy bicycles. It’s considered a thing of the past. You take an OFO or a Mobike subscription and use one of the thousand bikes that are parked all over the city. Indeed, as opposed to Europe, the Chinese shared bikes are not station based. Drop them where you want and pick one up when you need one. Nothing is easier : download the app, scan the QR code on the bike and you’re good to go. The fee is low (about 0.5$ per hour), but the 2 suppliers offer many discounts when people buy credit and, of course, increase the cash flow of the company.

Growing pains

OFO wants to expand, which is becoming more difficult in China : after letting things go wild for a while, the Chinese Government is intervening. Advertising on the bikes (wheel covers integrated in the rear wheel or even digital SatNav screens that display advertisements) is now regulated, parking regulations are being put in place and damages caused to the bicycle are punishable. But the major and newest obstacle to expansion is the limitation of the number of shared bicycles, in place since September 2017.

Companies such as ofo and Mobike are funded by venture capital and advertising, and are actually not profitable at this point. As most mobility start-ups, they rely on volume to become self-sustainable and eventually profitable. So looking across the boarder is an option that needs to be explored.

And this is where India comes in. Facing similar issues as the major Chinese cities and an attractive market for mobility providers, expanding to India sounds like the right thing to do and it’s exactly what ofo plans to do. However, the expansion might be a bit more difficult than hoped for.

India and China

With shared bicycles comes GPS tracking and data privacy. For a couple of years already, the Indian regulators have been very carefully assessing the data housekeeping of companies like Tencent (owner of the popular messaging app, WeChat) and Alibaba (more specifically, it’s digital wallet Paytm). It might be part of a political manoeuvre to limit the success of the Chinese companies in India, but regardless of the reasons, it makes expanding into India a difficult adventure.

In addition, the Chinese will have to face heavy local competition. India is home to many bike sharing companies offering similar services to ofo, who have the support of local and national authorities. As a matter of fact, the German based company Nextbike has been reported to start an alliance with Indian transport company Chartered Speed and launch bike sharing across India.

A Fleet Manager’s reflection

The bike sharing industry is a tough business that’s only in the starting blocks of market consolidation. For the Fleet Manager however, it’s clear that the increasing number of suppliers and available bicycles is a good thing. More bikes will be put on the road, pricing will be competitive and most probably lower than the per kilometre pricing of a car. Worth considering as a realistic alternative for last-mile mobility, not only in China or India.

Authored by: Yves Helven