sharing-economy

Cycling fever – sharing economy in a Chinese way

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Although the first bike rentals were established in the 1960s in Amsterdam, China has been really crazy about renting single-track vehicles over the last three years of the second decade of the 20th century. When talking about bike sharing in a Chinese way, we can use past tenses, because the sharing economy model ignited like a supernova and is fading now. Irrevocably for now. 

The western media closely followed the popularity of Chinese bike rental applications. In 2017, there were 2.5 million bicycles available in the streets of Beijing, whereas the service itself became popular in the 10 largest cities of the country. Bicycles could be rented everywhere, Chinese streets were filled with strings of bicycles from Ofo, Mobile, or Bluegogo. Each network had its own distinctive color (yellow, orange, and blue, respectively) and they were all closely followed by competitors. 

Spot-on flop 

The model based on sharing efficient transport in congested Chinese cities instead of having to have your own bicycle seemed to be a bull’s-eye. Millions of dollars were invested in rentals, but sidewalks full of bicycles equally quickly started to turn into cemeteries.

In mid-2017, it was possible to encounter fragments of sidewalks in Beijing that were impossible to go through due to dumps of bicycles occupying the very center of them. Bike sharing was supposed to be attractive to users because it did not require stands or docking stations. Each bicycle was blocked by an individual code received in the application. However, it quickly turned out that vehicles were of poor quality, kept breaking down and were abandoned anywhere like candy wrappers. 

The rental market was so attractive and theoretically unlimited that many people wanted to use it. In the second half of 2017, the Chinese Ministry of Transport said that there were 70 companies in this industry offering 16 million bicycles to 130 million customers. Mobike offered its services outside China as well and at its peak it expanded its network to 170 cities around the world. The investments proved to be overestimated, whereas the dumps of bicycles in the streets of cities were joined by even larger cemeteries in the suburbs. 

Unexpected series of bankruptcies

Bankruptcies began shortly after the peak. Bluegogo was the first company to collapse, whereas its insolvency was followed by speculations about the burst of the economy bubble on the rental market. Ofo, which was perceived as a symbol of the trend, was in dire straits as well. Despite the valuation of more than USD 2 billion in 2017 and the support of Chinese IT giants such as Alibaba, an e-commerce giant, and Didi Chuxing, a Chinese counterpart of Uber, they had to desperately look for funds to return deposits to millions of users. The wave of enthusiasm for bike sharing turned into disappointment, whereas thousands of workers were made redundant. 

Only one of the main players, Mobike, actually survived, but the collapse of the market forced it to withdraw from foreign markets and limit its activity to China only. Mobike was taken over by a relatively new player on the Chinese market, Meituan Dianping, one of the two leading food delivery companies in China. The acquisition transaction amounted to USD 2.7 billion. Mobike bicycles were given a second life as a transport base for lots of Meituan couriers.

sharing-economy-rowery

Chine economic reality is changing very dynamically. One phenomenon that brings millions in the spring is dynamically replaced by another business model in the winter of the same year. Bike rentals have created a fashion for sharing in China. Stands with umbrellas, sports equipment, and even luxury bags to be rented for minutes or hours were made available to citizens. The phenomenon fascinated the world and showed that Uber or Airbnb, which are known to us, could act more broadly and with more impetus. 

Unfortunately, a trade war, which the United States started against China, hove into sight in mid-2018. The authorities of Beijing consider this moment to be an opportunity to introduce another set of reforms. Facilitations for entrepreneurs, increased access to the Chinese market for foreign companies and redirection of the capacities of domestic companies to unused groups of customers are only some of them. The trade war has hampered the growth of Chinese GDP, but in the longer term the package of reforms, in particular with the launch of access to new types of services for less prosperous citizens (the so-called consumption sinking), can generate new types of profits. 

Perhaps in the new reality, bike sharing will find its place, but this market segment will still need to be treated with greater distance and caution. 

 

CONTACT WITH Editor in Chief

Michał Serwiński

+48/ 698 059 620‬
michal.serwinski@frsi.org.pl

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