If 2017 was the spring of hope for Chinese bike-sharing startups’ international ambitions, 2018 is their winter of despair.
The year has not been kind to Ofo, Mobike, and their ilk.
Ofo reportedly plans to quit Germany, Australia, Israel, the Czech Republic, Austria, and India, in addition to significantly scaling back in other markets like the US and the UK. It is also said to be facing difficulties in Singapore.
Mobike, too, is scaling back its plans in the US, although it claims to be expanding elsewhere. And Hong Kong’s GoBee, which had similarly made a major international push, pulled out of Europe entirely before going bust last month.
So what gives?
The dockless model makes it comparatively cheap for China’s bike-sharing startups to set up operations, but it also makes them incredibly vulnerable to theft and vandalism. In most countries, the operating company is ultimately responsible for fines related to misplaced, poorly parked, or vandalized bikes. This means that bike-sharing companies often get burned twice when their bikes are trashed on the streets: they have to spend to replace the bikes, and they have to pay local authorities the requisite fines.
After initially offering deposit-free rides, companies like Ofo eventually pivoted to requiring users to pay a security deposit. But apparently, even those fees haven’t been sufficient to cover the damage. When GoBee pulled out of France, its official notice cited “mass destruction,” adding:
“In four months, 60 percent of our fleet was destroyed, stolen or privatized, making the whole European project no longer sustainable.”
The numbers are apparently similar for other apps across international markets. Washington D.C., for example – which Ofo and Mobike both recently abandoned – has seen some dockless bike-sharing companies lose 50 percent of their fleets, according to a city official. Even the polite British apparently aren’t immune – Mobike employees in the UK told the Financial Times they have a particular problem with Manchester riders tossing their bikes into trash bins and canals.
And in this photo from social media, Mobikes litter the streets of Manchester:
Differing urban environments
Another issue is that the international cities – particularly in the West where bike startups have set up shop – aren’t quite the same as China’s typical urban environment. For example, Western cities tend to be less densely populated and a bit more spread out, which can mean riders need more time to search for the closest available bike, and then spend longer riding on that bike. This may be a turn-off for some Western users, who’ve complained that the companies’ low-cost bikes aren’t very comfortable for longer rides.
Then there’s the fact that many Western cities don’t have the broad streets and sidewalks of modern Chinese cities. So having a bunch of bikes clumped together could become an obstacle, an eyesore, and a target for vandalism since they’re often found taking up precious sidewalk or parking space.
The local regulatory environment can pose problems, too. Some Western cities such as Washington, D.C., for instance, limit the number of bikes that operators can have in their fleet. However, Chinese firms have sometimes found those limits to be too low, requiring users to walk long distances to reach the closest bike. Compare that to China, where the number of bikes in many cities is virtually unlimited, and it’s typically easy to find dozens of available bikes within a block or two.
In some cities, bike-sharing startups also find themselves competing with newer scooter-sharing startups.
Spin, a US scooter-sharing company, has gained significant traction in some American cities since its March launch. Every user who opts to hop on a scooter is a potential customer that bike-sharing startups have lost.
Financial pressure and competition
But the biggest reason for the international pullback, particularly in Ofo’s case, might be domestic. The company is embroiled in an expensive turf war in China with rivals like Mobike and HelloBike that’s reminiscent of the cash-burning wars a few years ago that involved ride-hailing players Didi, Kuaidi, and Uber. Didi and Kuaidi merged and ultimately absorbed Uber, but a war-ending merger seems less likely for Alibaba-backed Ofo after its chief competitor Mobike, which was acquired by Alibaba rival Meituan.
Bike-sharing giants have so far found it easy to raise large sums of cash – Ofo just raised a US$866 million series F round this spring. But analysts predict a slowdown in China’s bike sharing market this year, and reportedly neither Ofo nor Mobike is making a profit. The cash-burning can’t continue forever, and it seems that both companies – especially Ofo – are concentrating their resources on securing a spot in the Chinese market now that the hopes of a blockbuster merger have been snuffed out.