Are power bank rentals just a price bubble in China?

While the idea of bike-sharing has taken China by storm in the past year, investors are now looking to create another hot vertical under the buzzword “sharing economy”— power bank rentals.

This is insane. Within 40 days, investors in China have poured in RMB 1.2 billion (USD 174 million) worth of funds into power bank rental startups, local media reports. Here are some highlights of the latest sharing economy craze.

Xiaodian, a Tencent-backed power bank rental startup, announced it has secured RMB 350 million (USD 51 million) in Series B financing this month, led by Sequoia Capital and Banyan Capital. Existing investor Tencent also participated in this round of financing.

Ankerbox last month received a USD 14.5 million Series A financing from IDG and Sunwoda. Then in early May, Jumei, a cosmetics e-commerce giant which was previously listed on NASDAQ, announced to purchase around 60 percent of stake in Ankerbox for RMB 300 million (USD 44 million).

Hidian, a Shanghai-based power bank rental startup, this month received RMB 100 million (USD 14.5 million) for its Series A round from Light Speed China Partners. Laidian, another startup in the power bank rental business, secured USD 20 million in its Series A round from SIG and Redpoint Ventures China last month.

The sudden influx of massive financing shows how anxious investors have been about not wanting to be left behind in the investment craze over power bank rentals. The speed of investment we are seeing here is much faster than that of bike-sharing investments last year. However, there has been talk in the industry saying that power bank rentals are more of a fake demand in comparison with bike rentals.

An Ankerbox charging station at Donuts Cafe in a mall in Beijing. Photo by Timmy Shen/AllChinaTech.
An Ankerbox charging station at Donuts Cafe in a mall in Beijing. Photo by Timmy Shen/AllChinaTech.

This is how power bank rentals work. The companies either set up fixed charging stations or allow users to take away portable power banks. Xiaodian adopts the first approach, where it has placed charging booths in public spaces such as restaurants and subway stations. Ankerbox and Laidian, on the other hand, allow users to rent portable power banks that they can take away and return it at designated stations. Most of the startups charge nothing for the first hour of rental, and charge RMB 1 per hour or so after that.

It may seem easy to rent a power bank from these stations, but to be honest – do people really need it? AllChinaTech visited an Ankerbox station located in a cafe in a busy shopping mall one Friday afternoon in Beijing. In one hour, only one user rented the power bank. “I find it convenient, as now I need to charge my iPhone 7 so I won’t miss calls from my child’s kindergarten teacher,” said Yang Lili, a first-time user of power bank rental services. Yang usually comes to the coffee shop at around 3 p.m. to wait to pick up her three-year-old child from the kindergarten across the street. “My purse can’t fit a portable power bank, so it is very convenient for me to rent it from here,” she said.

Power bank rentals can indeed come in handy for scenarios like these. However, the demand for this convenient service may decrease as technology evolves. Many smartphones nowadays come with long battery lives, and most of them can support one charge per day. Moreover, it is not much of a hassle to carry our own power banks around as well. This is certainly different from shared bikes, which are difficult to carry around but provide an easier way to commute. It is totally fair to say that there is more demand for bike rental services, but not so much for power bank rentals.

Also, the psychology behind this investment is worth noting. Chinese investors seem to be quite open and willing to pour money into items that come with low costs, short design cycles and fast cost recovery. Haidian’s founder Yuan Bingsong told local press that it only takes 45 days for them to recover the cost of one power bank irrespective of the machine and venue cost. And now, everything that sounds rather relevant to the sharing economy can potentially be the next big thing in China’s investment arena.

As investors and founders of these power bank rental startups seem optimistic about the future of this business, they have also come up with a statement that can give themselves a way out. “If it [the startup] fails, let’s just say we’re serving the public,” wrote Jumei’s CEO Chen Ou in a Weibo post. Chen became Ankerbox’s chairman after making a huge investment in the startup. Yuan has also claimed that the business can still do good to society even if it fails, according to local media.

In this case, it might not come as a surprise that investors in China are favoring power bank rentals so much. However, these startups must figure out a clearer business model that will last long. Otherwise, with the fast developing technology and more mobile phones with better battery capabilities being released, these business models of power bank rentals might soon die out in the foreseeable future.

Read also: Top investments in China’s power bank rental scene

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