What do Amsterdam and Beijing have in common? The two could not be more starkly contrasted, except for one small overlapping love – the bicycle. While their histories are wildly different the need – or even the desire – to have the city planned around the humble bike is central to their collective lure. Holland is said to have around 13 million bikes, while Beijing – that’s just one city – is recorded to have over 9 million. The love of the bike is a strong one.
The bicycle has been a staple in almost every city of what we remember to be pre-industrialised China”. Back in the 1970s times were tough and hardly anyone had a car, but getting a bike for yourself was the first step to personal freedom. Cheap, easy to learn and quick to learn, who could refuse. As China became richer the desire to trade up became more focussed. Millions of cars now pour on to the roads causing immense suffocating clouds of smog, with more set to follow next year. The pollution is a leading health concern with at least 200,000 people per year suffering from traffic pollution-related illnesses.
Amid this trend for the automobile, it makes sense for the country to go back to its roots. Embrace the bicycle and lead a greener and pollution free trail for others to follow.
In 2010 companies saw this niche and stepped in to provide an internet connected bike-sharing service fit for modern China. In a short period, the industry had ballooned to over 50 platforms covering every city and province. Services like MingBike, Bluegogo, and Ofo all offering GPS-enabled bikes which have an “Uber-like” customer experience. Users can book a bike online – using their App – and then pay in 30-minute time slots. There is also no need to pick up or drop off bikes from specific points, users are directed to places where they can find their newly-booked bike and then leave their bike at their destination. Unlike the bike-sharing services in London and Paris, this dockless bikes system was pioneered in China. The benefits of such a system is much lower operating costs. Bluegogo has no need for premium city space to create a bike-sharing island, and neither are attendees. The rid costs were also cheaper. A bike in London is around $3, and the new startups costing around 30 cents for half an hour. Quite the bargain.
Early last year MingBike and Bluegogo accumulated over $2 billion (yes, that’s billion) in new funding from venture capital firms to expand their operations. The inevitable frenzied cash burning for such a capital-intensive business followed. Bluegogo operated close to 700,000 bikes with 20 million registered users, and that was just for the third largest in the industry. Ofo is set to expand its business to the UK, with containers shipped with their own bikes heading for its pilot project in Cambridge.
November saw a sudden turn in the industry when the South China Morning Post (SCMP) reported that Mingbike made its entire staff redundant. Users also complained that they were unable to get their initial deposit of 200 yuan (roughly $30) refunded to them. Former employees further reported that they have had their salary withheld. The SCMP reports:
Calls by the South China Morning Post to Mingbike’s main phone line were not answered. The last post on the company’s Weibo account was in earlier October and its WeChat account has not been updated since November 10.
In response to the latest closure and growing risk of deposit refunds, Chinese authorities have stepped in, with Ministry of Transport spokesman Wu Chungeng saying on Thursday that local governments would play a major role in ensuring the protection of consumer rights. He added that regulations for the industry were being drawn up by authorities.
Bluegogo users also encountered a similar problem when the company also burned through their pile of venture capital cash. The absence of refunds from both companies has so far affected more than 6 million users.
The turbulence has not put off investors as China’s first bike-sharing company went public late last year. Changzhou Youon Public Bicycle System raise close to $100 million and saw its shares soar for the first four days. September 2017 saw prices peak to 100 yuan per share (about $15) which then experienced a steady download decline thereafter with shares trading at 50 yuan.
Given the irrational euphoria surrounding the new crop of China unicorns, it is anyone’s guess when the industry will see a return to reality. As Keynes once said, “the market can remain irrational longer than you can remain solvent”.