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Bike-sharing boom in China pedals to new heights

By dailymail / Published on Tuesday, 18 Jul 2017 12:48 PM / No Comments

Jeffrey Towson, a professor at Peking University, says that the uptake for these services is significant and appears stable. He does highlight areas of potential caution, though, including the fact that there are no real barriers to entry in this market. He says that could limit the long-term profitability of the companies.

“It’s still a very good business, but doesn’t have the awesome economics of Didi, Uber, and Airbnb,” Towson said. “Of course, these are still early days and their business model is still changing. Many of the most successful businesses such as Google and Facebook didn’t really figure out their business models until later. They were a consumer phenomenon at the beginning.”

Another concern for investors: signs of possible excess in the market, with widely circulated photos of bikes dumped in huge piles on city streets in China.

When asked by CNBC about those images, an Ofo spokesperson blamed the behavior on “different people with different agendas that sabotage the bikes” but also emphasized that it is working on solutions including smart locks and location services for its fleet.

Despite these hurdles, both companies are already eying international opportunities. Mobike has expanded to Shanghai, Japan and England and hopes to launch in the U.S., as does Ofo, which says that it has conducted trials in California. However, if and when these two Chinese companies do begin catering to American bike-sharing customers, they could face real competition

The incumbent in the U.S. bike-sharing market is Motivate, which operates bike-sharing programs in nine metro areas including New York. There, the company, which says it is profitable, runs Citi Bike, where fans rent bikes from fixed stations throughout the city. On average, there were nearly 50,000 rides per day in May. The cost is $12 for a day pass.

Competition could also come from VC-backed start-ups like LimeBike, which more closely emulates the Chinese model of dockless bike-sharing. It remains to be seen just how many local city officials and urban planners in the United States will enthusiastically embrace this model. Still, Sand Hill Road is placing bullish bets.

LimeBike has already raised $12 million, including money from Andreessen Horowitz. Jeff Jordan, a general partner at that firm, says the costs of running this new form of bike-sharing are far less than building and maintaining traditional, fixed kiosks. He also sees business opportunity in the vast amount of data such start-ups could collect about their users.

“The thing that gets really interesting is they will know your location and where you are,” Jordan said. “So if you’re about to park your bike and there are two different coffee places near you, which one do you want to go to? You begin to feel that there could be other ancillary businesses if this actually succeeds and gets high utilization.”

The next city to test LimeBike’s technology: Seattle, where the company says it expects to launch this week.