Bike sharing is on the rise. Transportation giant Uber recently acquired start-up Jump, integrating its solutions with a fleet of 12,000 free floating bicycles. And if Uber is involved there must be good reason. As explained in a study by Statista, the number of public bicycles in the world rose from just 700,000 in 2013 to 2.3 million in 2016. The most significant growth has been in China where there are 430 active bike sharing services.
The new “free floating” model
Unlike the old services sponsored by the city, the new generation of bike sharing companies use mobile applications and localisation technology to enable users to find and unlock bicycles left anywhere along the street. When cyclists reach their destination they can leave and lock their bicycles anywhere, paying a small fee on the basis of the distance they have travelled or the amount of time they used the bicycle. This model (free floating or dockless) has created controversy with many people complaining about the thousands of bicycles cluttering the city streets. Some cities have even gone as far as banning the introduction of the new bicycles.
The Chinese market in numbers
Having undergone a boom in 2017, this year the Chinese bike sharing market should slow down. 235 million people used a shared bicycle in 2017, a 14.6% increase compared with 2016. This figure is expected to rise to 276 million in 2019, up 17.4% compared with the previous year, according to a report published by iiMedia Research Group, a consultancy firm based in Hong Kong. “The main bike sharing brands have developed a solid user base and economies of scale. They will no longer need to offer knockdown prices to gain market share in the future”, states the report.
The future of bike sharing
Over 40 latecomers arrived on the bike sharing market, intensifying a highly competitive sector that has seen the protagonists spend furiously to offer major discounts in the attempt to acquire larger market shares. Mobike and Ofo often introduce periods of “free rides” and hand out little prizes and coupons. Many of the rivals of the main players in the sector have since folded, unable to keep pace with the spending. According to iiMedia Research Group, in 2016 there were only 28 million shared bike users but this number exploded by 630% to 205 million the following year. However, the sector continues to haemorrhage money. Ofo has launched a programme aimed at transforming the company into a profitable business, cutting costs and diversifying its products, venturing into advertising and financial products.
But the ecosystem, now consisting of around 60 companies, began to crumble last year. Around a dozen companies have closed, the most illustrious victims including Bluegogo, whose business was partially acquired by Didi Chuxing. On the other hand, the American start-ups are going in strong and contributed to driving up total spending in 2017 to $2.8 billion as compared with the $343 million recorded the previous year (Cb Insights data). Now the challenge is ensuring the sustainability of the business model. The example of the Chinese Gobee Bike, which decided to leave Italy and Europe due to the excessive costs connected with the high numbers of damaged or lost bicycles, is emblematic.