Why can’t a bike sharing app thrive in China?

As a member of Generation X, Yan Fei’s lifestyle exemplifies that of a young professional in Beijing. There’s a way for him to to tackle the challenge of the heavy traffic in the capital.

He chose to bike home after work. The journey took him one and a half hours and the reward is that he lost 700 grams weight over the journey. Guess what? To take a cab home will also use up one and a half hours.

“The most amazing fact is that the journey only cost as little as three RMB (40 cents USD),” Yan Fei posted on his Wechat Moments.

But Yan wasn’t riding his own bike, he was using Mobike, a leading local bike maker and bike sharing app.

Founded in Shanghai in 2015, Mobike tried to make their bikes accessible and able to park anywhere eligible, reported Sina Tech.

All it takes to rent a Mobike is to register online and pay a deposit. The app then can show you where the nearest bikes are and guide you there. You can then scan the QR code to unlock a bike. Mobike charges one RMB per 30 minutes.

Mobike in Shanghai (Photo from Baidu Images)
Mobike in Shanghai (Photo from Baidu Images)

However, as more and more new customers are getting into Mobike, some earlier users are abandoning the app, for a handful of reasons.

Most prominently, there is a bike shortage during rush hours. The guide is also occasionally misleading when users try to reach a bike. Some say that the Mobike bikes are too heavy. Finally, there have been repeatedly reported cases of deliberate damage by vandals.

On top of product drawbacks, Mobike’s business model also faces challenges. The manufacture cost of every Mobike is RMB 3,000. Based on the rental price, every Mobike requires at least 25 months to pay back its manufacturing cost, if each bike finishes four transactions per day.

Mobike has been expanding fast in Shanghai and Beijing. It has launched over 10,000 bikes in Shanghai and 2,000 bikes in Beijing. Mobike confirmed that it had received millions of dollars in Series B financing from Panda Capital and Joy Capital in August.

However, the fast-growing trend won’t last long if its earning cycle is too long – investors will become tired of burning cash.

In general, state-funded bike rental hardly makes sufficient profits. Almost every province has its own bike rental projects. The Beijing city government operates around 50,000 bikes.

Wang Xiaofeng, CEO of Mobike, was the head of UberChina’s Shanghai division before he resigned from the post and joined Mobike in the second half of last year.

Mobike’s main rival in China is bike sharing service app “ofo”, which focuses on bike rentals within colleges and universities.

Analysts say that the future of bike sharing apps is most likely that they could be acquired by large ride-hailing app, such as Didi Chuxing.

(Top photo from Baidu Images)

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