The public spat between Tencent’s CEO Pony Ma and GSR Ventures managing director Zhu Xiaohu over who is the most popular bike rental platform has added fuel to China’s already heated bike rental industry. The discussions between investment moguls make it difficult for onlookers to dig up into the correct figures in the burgeoning market. Even the companies themselves found this a challenging task.
7Park Data, a research firm based in New York, recently released its observation together with insights on China’s bike rental market. According to 7Park Data, ofo is leading the race with a 65% market share.
Modern bicycle sharing systems are effective and convenient in solving the “last kilometer” problem in urban China, which has witnessed a decade-long recession of bicycles as a means of transportation due to the popularity of private cars. The bike rental boom is reigniting users’ passions for bicycles while both companies claim to operate an average of 20 million daily rides. The report pointed out that riders are spending an average of around one hour on both ofo and Mobike as of May 2017 – up from an average of 25 minutes earlier this year.
Ofo is growing at a breakneck speed of 386% in weekly active users from Q4 2016 to Q1 2017, whereas Mobike is growing at a slower but still impressive 180% over the same period of time, the report shows.
Shanghai leads the world with 450,000 shared bicycles, nearly all of which began operating in 2016. Ofo and Mobike have each signed manufacturing deals in a battle for market share (reminiscent of the driver supply turf war between Uber and Didi Chuxing). Ofo owns a majority share in eight of China’s 14 Tier 1 provinces and municipalities with Mobike leading in the remaining six.
Prospects outside of China
In addition to the local market, both companies have begun to expand outside of China. Ofo began operating its service in Singapore in early 2017 as the first Chinese bike rental company to operate overseas in a bid to scale. The Beijing-based startup is now operating in five countries. In a similar initiative, Mobike is also tapping overseas markets in Singapore, UK and more recently Japan.
Localizing products for new markets is the most important thing to get right and bike rental is no exception.
“The dynamics which support the growth of bicycle [rental] are unique in different markets. The success of expansion into other markets will be in part based on these factors – including population density (i.e., high capacity utilization and high availability), economic factors, conducive environments for safe biking (i.e., physical layouts, base rates of crime, etc.), and state/government regulations that do not hinder growth,” 7Park Data’s director of insights, Brian Chaitoff, told TechNode. “As with ridesharing, access to capital for new entrants is critical to help foster and support growth in new markets.”
One closure, one acquisition
Although the two incumbents are still under the pressure to offer free rides in order to maintain market share, there are some early signs of market consolidation in the sector. Chongqing-based bike rental startup Wukong Bike announced that it is shuttering earlier this month. Shortly afterward, people with knowledge of the matter disclosed that Mobike has recently completed the acquisition of smaller player Unibike.
“As in ridesharing, we expect markets in the long-term to be winner-take-all. This is due, in part, to the benefits realized by riders by having one winner, such as greater access to bikes,” said Brain.