Chaos in the Kingdom of Bicycles

By Tom Parker

I first arrived in Beijing 25 years ago, on a bright December day and made the journey from the brown, low roofed Capital Airport to my Univeristy along a narrow two lane road. Located on the south eastern fringe, the roads were full of weird and wonderful vehicles that looked more like inventions from Thunderbirds than road worthy craft. Trolley buses, motorcycle utes, glass covered tri-shaws and the odd donkey competed with the ubiquitous yellow ‘breadloaf vans’ (面包车) and mini buses with spruikers shouting stops through a megaphone like a race caller at a country meet. A few private cars were visible but Beijing’s broad avenues belonged to bicycles. 

The flat streets of China’s capital were filled with black Flying Pigeons made in Tianjin with a steel frame and big wheels, fixed gears, and low hung handlebars. Heavy to turn and as nimble as a tank, these bikes took a while to get going but maintained a cruising speed that made riding effortless and enjoyable. The joy of joining in a pod of bicycles like a school of fish made you invincible, and gave you greater combined carriage that made buses stop or pedestrians wait until you had passed. 

Part of the three ‘must haves’ that bestowed social status for every family, the bike disappeared as China’s consumption changed and aspirations moved away from bicycles, watches and sewing machines to the modern ‘must haves’ of money, apartments and cars. This shift in conspicuous consumption was highlighted by a comment by a female contestant on China’s popular dating show If You Are the One? (非诚勿扰) when she suggested that she would “rather cry in a BMW than laugh on the back of a bicycle”. 

Aside from automobile aspirations along with increased wealth, bicycles were replaced by efficient metro systems with Beijing building over 100 kilometres of underground railway in seven years in the lead up to the Olympic Games. Shanghai now has the largest mass rapid transit system in the world with over 588 kilometres of tracks and 364 stations. Added to this is cheap taxis with flexible payment systems and ride-sharing app Didi Chuxing that acquired Uber’s exhausted China enterprise, means that there are multiple options available than just the humble bicycle. 

However, over the last six months through tech backed investors, the bicycle has been revitalised as dockless bike sharing has become serious business. Uber for bikes? Maybe. But instead of getting dinked with mints, these bikes are found through GPS and after registering a deposit of between 99RMB - 299RMB depending on your app, you scan a QR code, use bluetooth or WeChat to unlock your bike and you pay as you pedal for 0.5RMB to 2RMB per hour. 

Disruption is a buzzword that is overused and rarely understood but the bike sharing phenomenon is changing Chinese city streets. Like most countries, China had clunky shared bikes that were parked, locked and docked that were mainly used by domestic tourists or international brands seeking a new form of outdoor advertising. The ability to be dock free through inbuilt GPS, and incredibly low rental prices, means people are using these bikes to replace the office walk from the metro station or the local restaurant to home. Just like couriers in China, these bikes are built for the final kilometre of the user’s journey. 

This free-range convenience also breeds disrespect with bicycles being discarded like junk food wrappers littering the streets with some district governments using their hired goons chengguan (城管) or by-law enforcement officers to remove them or stack them in popular locations outside metro stations. Chinese social media circulates images of mass bicycle abandonments during public holidays and festivals at tourist sites as more people engage in this ‘disruptive’ technology. 

The two main bike sharing apps, Ofo and Mobike can be distinguished by their colours, yellow (Ofo) and white (Mobike) as well as their tech investors. Mobike is backed by Tencent Holdings, parent of WeChat, China’s most used app that is more like an ecosystem. WeChat includes a wallet function that enables users to pay for trains, movie tickets and purchase anything using WePay with Mobike added to the wallet, it opens up 890 million active WeChat users to their bikes.  

Not to be outdone, Ofo’s bike sharing service is backed by Didi Chuxing, which announced that it was adding the ability to hire bikes to its app that has 400 million users across 400 Chinese cities so that customers can now hail taxis, private cars, and bicycles. There are already 3 million bright yellow Ofo bikes across 50 Chinese cities with international expansion underway in London and Singapore with another 18 countries targeted by the end of the year. Didi Chuxing is backed by Jack Ma’s Alibaba and both bike sharing companies have managed to convince investors to collectively contribute over $US1 billion. But aside from disrupting people’s travel patterns and city sidewalks, can these bike sharing apps make money?

Many international venture capitalists clearly don’t care as they seem to suffer from FOMO - Fear of Missing Out with Warburg Pincus LLC, Matrix Partners, Citic Private Equity Funds Management Co., Macrolink Group, Sequoia Capital Operations LLC, and Singapore’s Temasek Holdings betting on the benefits of bike sharing. 

Unlike Lyft or Uber, Ofo and Mobike have to buy and distribute bikes as well as develop and maintain the back end technologies, marketing and payment systems. The overheads for inventory are high and they need to replace or repair as well as ensure there are enough bikes on hand for peak periods as you can’t suddenly add more bikes if there is a surge of demand due to weather or major events. Also, the low rental cost and lack of loyalty means that it will take a while before Ofo and Mobike start seeing returns let alone investors recouping their initial capital. It must also be remembered that if these guys are the Uber for bicycles then it’s worth pointing out that Uber is still not a profitable business. 

While Ofo, Mobike and the 30 other bike sharing apps continue to disrupt and fight for market share, they provide greater choice for consumers and may become another marker in China’s consumption cycle, but I treasure the days of Flying Pigeons when the only rideshare was in a noisy minibus or yellow box microvan that looked like a loaf of bread.
 

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