Is there still room to ride in the bike sharing market?
DOCKLESS bike sharing companies across the world are ceasing operations due to high costs and regulation clampdowns.
That’s not stopping smaller bike sharing startups in China from carving out a niche for themselves in the booming market, however.
In fact, some of the startups believe that the bike sharing craze has created a strong demand, which leaves startups with plenty of room for growth and competition.
Based in Shanghai, Hellobike is one of the bigger rivals against Ofo and Mobike – the two largest players in the industry within China.
Instead of going head to head with the two bike-sharing giants in major cities such as Shanghai and Beijing, Hellobike is focusing its efforts in smaller cities.
“With only two players in China, we still see a lot of space for us to provide better services and be more efficient in the industry,” Fischer Chen, Chief Financial Officer at Hellobike spoke to CNBC.
Chen added that they are seeing high frequency and strong demand from the lower tier cities.
Today, Hellobike has a presence in 300 Chinese cities and boasts of a 3.6 million strong (monthly active) user base, according to data from analysts Trustdata. The company claims that users take around 20 million rides daily.
The move to smaller, rural cities is a strategic move that paid off. Being a much smaller company, business was much less competitive in lower-tier cities; Ofo and Mobike were focussing their efforts in tier-one cities.
However, as both Beijing based companies start to expand into China’s smaller cities, Chen explained that the company has the upper hand in the daily operations, maintenance, and capital deployment efficiency.
Additionally, Hellobike does not charge users a deposit for using its bike-sharing service, unlike other bike-sharing platforms. Chen believes this is also a contributing factor to its success.
The deposits are normally charged in case of property damage. Regardless, both Ofo and Mobike still racked up high costs due to vandalism, theft and poor maintenance of the bicycles.
As reported by the Financial Times, Ofo was paying out US$25 million a month, while Mobike is burning about US$50 million monthly.
For now, Hellobike is comfortably in the lead in rural markets in China. However, it remains to be seen if it will be sustainable in the long term, and who gets edged out of the competition.