Hellobike, China’s leading bike-sharing service platform, recently announced that the industry has entered the “3.0 era.” Hellobike believes that bike-sharing in China is set to play an increasingly integral role in fulfilling public transportation services. But why?
What is the “3.0 era”?
Following an initial era of vicious competition and high cash burn rates, the bike-sharing industry has now shifted its focus to financial sustainability and higher profit margins. According to a report released by Dongxing Securities, this was caused by changes in the competitive landscape of the industry, which has raised prices and increased the profitability of the bike-sharing business model.
“The bike-sharing industry has passed the early stage of extensive growth and cash burning. The business now comparatively relies on technological innovation and focuses on refined operation and management,” Hellobike’s co-founder and CEO Yang Lei said at a press briefing on April 27 in Shanghai.
Hellobike executives also said the company’s bike-sharing business made some profits last year; since last March, the e-bike business in particular has seen an increase in profitability. In addition, Yang also revealed that the company has healthy cash flow and relatively ample cash reserves.
Going forward, the bike-sharing industry’s new “3.0 era” will see growing cooperation between companies and the government, with shared-bikes playing an increasingly indispensable role in public transportation networks. As a greener and more efficient way to get around, shared bikes help to ease traffic congestion in cities. Everyday, more than 1 billion rides are completed on two-wheeled vehicles in China.
One challenge that remains unresolved is the orderly parking of shared bikes. Randomly parked bikes often obstruct roads and can cause temporary traffic jams. Consequently, municipal transportation commissions in many cities including Beijing and Shanghai have introduced policies to regulate bike parking, and bike-sharing companies have dedicated themselves to solving the problem and improving maintenance.
“We are looking for new ways to co-manage the disorderly parking with the government with the help of new technologies,” said Chu Yiqun, a manager of Hellobike.
This year, in cities such as Shanghai, Hellobike has piloted a new mode of parking shared-bikes at designated locations using bluetooth road nodes, launched in a new initiative last year. Within a certain parking area, the nodes can scan the bikes and tell whether users have properly parked them. If not, the nodes will transmit commands to the bike: The lock of the bike flicks open to warn the user, telling them the bike is parked in an improper location. As a result of the new features, the city of Shenzhen allowed Hellobike to distribute an additional 750,000 bikes to the city, all equipped with the new parking capabilities.
New technology is driving much of the changes in common practices across the bike-sharing industry. Last August, Hellobike upgraded Hello Brain, a smart transportation OS that incorporates big data, cloud computing, and AI-based technologies to help streamline the distribution and maintenance of bikes. The smart system can monitor bike distribution in different areas and provide real-time updates to the company’s staff; this helps improve the efficiency of bike redistribution and avoid bike congestion in certain areas.
Era 1.0 and 2.0, relics of the past
About five years ago, when the bike-sharing business started to grow in China, investors poured cash into the industry, reinforcing its rapid growth. That period was considered the “1.0 era” in the bike-sharing industry, and was characterized by direct competition between the startups Ofo and Mobike. Founded in 2014, Ofo, had received millions of dollars over several funding rounds from investors including Shunwei Capital, DidiChuxing and Alibaba. Similarly, Mobike secured large funding rounds from investors including Tencent and Sequoia Capital upon its launch in 2015. To compete over market share, the two startups burned through cash, bleeding “billions of dollars offering freebies to get customers,” according to Bloomberg.
The cutthroat competition came with a price. In 2018, the founder of Ofo admitted the company was considering bankruptcy, leading users to clamour for the return of their deposits. According to the report from Dongxing Securities, Ofo’s problems were due mainly to its rapid expansion into new markets and its failure to control cash flows. Earlier that year, Mobike was sold to China’s group-buying giant MeituanDianping for USD 2.7 billion, and has since been rebranded as Meituan Bike.
But despite these struggles, the bike-sharing industry still showed promise; this was realized through more innovation and competition. While Ofo and Mobike were busy battling for markets in big Chinese cities and overseas, Hellobike, a company founded in 2016, outmaneuvered the two start-ups by conquering China’s 3rd and 4th-tier cities. The company has since grown into the largest bike-sharing platform in China, claiming that 300 million users have taken more than 12 billion trips on its vehicles in the past 3 years; today, it operates in more than 360 Chinese cities and supports more than 20 million daily rides. Notably, China’s ride-hailing giant Didi also entered the bike-sharing business in 2018, with the launch of its bike-sharing brand Qingju. Qingju just finished its series A funding round this April.
In the new “2.0 era,” companies are focusing more on customer service, efficient maintenance and cost control. Hellobike was the first bike-sharing firm to go deposit-free for all users who meet a certain threshold in Ant Financial’s Sesame Credit system. Hellobike also continuously releases new bike models, to ensure constant improvements in bike quality and the user experience. On March 30, Hellobike launched its fifth model in Guangzhou, Yunxing, equipped with a new smart lock. This came a week after Hellobike’s launch of a new e-bike model, Yunqi, equipped with a smart voice navigation system that can be connected through Bluetooth.
The potential for growth in “e-bikes”
Shared electronic bikes, or e-bikes, can become the new market darling of China’s two-wheeler industry, meeting the needs of users who take trips between 3-8 miles. The travelling experience during the COVID-19 pandemic shows that e-bikes can offer safer transport, helping to reduce the risk of contracting the virus. Hellobike, DidiChuxing and Meituan all compete in the e-bike game, but Hellobike now boasts the largest market share with over 300 million registered two-wheeler users.
As a result, Hellobike’s co-founder Li Kaizhu said, “Shared e-bikes will expand even faster than shared bikes this year.”
The e-bike market is shaping up to be very competitive, with a large number of daily users. Right now about 700 million daily trips are made on e-bikes in China. From September 2017 to the end of February 2020, Hellobike’s e-bikes have expanded to over 320 cities, with a total of 3.7 billion kilometers ridden.
Moreover, there is a high likelihood that growth in the e-bikes industry will promote the development of the shared battery market. Efficient battery swapping remains a challenge for e-bike providers. Hellobike continues to improve the batteries of its e-bikes, which are supplied by CATL Battery, a leading vehicle battery manufacturer based in Ningde, Fujian Province. In April, Hellobike’s joint-venture with CATL and Ant Financial raised RMB200 M (USD28.3 M) in funding from Hangzhou-based power electronics solution provider Zhonhen.
Many cities including Kunming and Hefei have welcomed the launch of e-bikes. In November 2019, the City Management Committee of Kunming announced that e-bikes can be launched in the city. Some first-tier cities such as Guangzhou and Shenzhen currently have a quota system for the launch of shared-bikes based on the operation performance of bike-sharing companies. The method will hopefully be adopted in the management of shared e-bikes.
China’s bike-sharing business has entered a new stage of healthy competition and development, focusing more on its operation and management and promoting technological innovation. The two-wheeler industry hopefully will see the blooming of shared e-bikes.
(Photos from Hellobike)