IS “UBER FOR BICYCLES” SUSTAINABLE LONG-TERM?

Bike-sharing is all the rage in Asia now but will it be able to overcome all its teething problems?

Text by Jan Yong

Recently in Guangzhou, I noticed a lot of commuters cycling on the streets. The city’s bus and subway fares are already very cheap (for example, they are cheaper than in Malaysia), so why the bicycles? Simply because it’s a very convenient form of first and last mile transportation – and is even cheaper than the bus or subway, a young rider told me.

All you need to get started is to download the app, deposit money online into your account in the app, book a bike at a location near you (the app will show you the location), scan the QR code on the bike to unlock the bike, and you are on your way. You can drop off the bike at any of the widely distributed bike stations or designated bike parking areas in the city. When you lock the bike, it will trigger an automatic online payment. It only costs RMB1 for one hour in Guangzhou. No wonder it’s popular.

Recent reports indicate that hundreds of millions, almost USD1 billion have been poured into China’s top two bike-sharing apps, Ofo and Mobike. The most recent was USD450 mil injected into Ofo, making it the first bike-sharing company worth more than a billion US dollars (USD2 bil to be more precise) and the world’s biggest bike-sharing platform.

According to reports, Ofo claims to have more than 30 mil users spread across China, Singapore and the UK. Founded in 2014, Ofo now has a strong footprint in 40 cities in China and reportedly owns 1,000 bikes in Singapore and 500 in London and Cambridge. A trial is currently being conducted in the US and it plans to expand to over 20 countries by the end of this year, including Japan, Spain, France, Germany and the Philippines.

Its nearest Chinese competitor, Shanghai-based Mobike claims to have tens of millions of users, and more than 3.65 mil bikes with an average of over 20 million rides every day. It also has global ambitions with its first foray outside of China being Singapore – in March this year. Its CEO Davis Wang was recently quoted to have said Mobike is also a ‘unicorn’ – a start-up valued at over USD1 bil.

Recently, Singapore’s only home-grown bike-sharing company, oBike has upped the competition by entering the Taiwanese and Malaysian markets. According to Elgin Ee, oBike’s Singapore Country General Manager, it currently has a ‘few thousand’ bikes deployed in Singapore and plans to have a fleet in the ‘tens of thousands by mid-2017’.

“So far, we have achieved more than 500,000 signups and our members have been increasing their rides from once a week to an average of 2 -3 times a week,” he told Asian Property Review.

In Malaysia, oBikes have been spotted near IKEA in Petaling Jaya. According to Ee, a few thousand bikes have been deployed in the Klang Valley since April this year.

PEDAL POWER

The advantages are many – it reduces pollution and traffic congestion, saves costs for consumers while at the same time doubles up as a good exercise machine. For tourists, it is perhaps the best way to see sights that are normally missed when you are inside a tour bus. It beats walking anytime as you can cover a larger area and see more of the interesting local scene.

Bike-sharing is by no means new. It started in Europe in the late 1990s, becoming very popular in the 2000s and then spreading across the entire European continent, the Americas and Australia.

In Asia, China, which used to be a bike-riding society before its economic reforms transformed it into a car-owning society, is now leading the charge to go back to bike-riding in an effort to rein in its polluted and jam-clogged cities.

Some Chinese cities are so advanced in its offering that in 2013, USA Today named the Hangzhou bike-sharing system the ‘best in the world’. Started in 2008, it has almost 70,000 bikes with stations located at every 100 metres apart.

The immense popularity of the bikes has kicked off many startups – in China, no fewer than 12 other companies have already launched their apps targeting China’s 700 mil smartphone users. The model is the same – these startups distribute the bikes in the streets and use the same app technology, and frankly, there isn’t much to differentiate them from the top two platforms.

TEETHING PROBLEMS

The big question is, with so many competitors in the market, and various teething problems, how sustainable is this business model? After all, it is super cheap for the commuters while the initial investment is huge for the startups.

Although a small deposit is collected from every bike user, it is refundable at any time. Based on anecdotal evidence, there was an instance of a bike sharing company that went under a few years ago in China and couldn’t return all the deposits. Subsequently, to allay consumers’ fears, some bike-sharing platforms explicitly state that users’ deposits will be deposited with a particular bank which is then named.

Despite that, the teething problems remain – not just in China but in many other parts of Asia. The main impediment is many roads are not designed to allow bicycles a safe journey. And, for longer journeys, you still need to hop on the bus or take the train or taxi after dropping off the bike. Proponents will argue that this is the whole idea behind the shared bike – it is only for short-distance commutes with an average of 3km for each ride.

Next, vandalism of the bikes or even theft in some cases. The QR codes on some bikes have been known to be scratched off so they can’t be traced by the GPS system. Bike are also known to have been hidden in high rise buildings or private underground garages or dumped in areas such as canals. In extreme cases, users have stolen certain bike parts or intentionally damaged the bikes.

The availability or lack thereof is another gripe for some users. While some areas seem to have a surplus all the time, other areas suffer a shortage. Also, during certain times after midnight, bikes are collected back by some of the companies so users have to find other modes of transportation. Sometimes, they can’t locate the bike or the bike station.

Traffic violations such as riding bikes against traffic flow is common in China. There is hardly any enforcement as the traffic police do not seem to treat bike riders as a proper entity to be fined. And the most common violation – not parking in a designated area. Bikes are known to be parked indiscriminately – blocking other vehicles, corridors, fire exits, etc.

oBike’s Ee however maintains that instances of vandalism or wrongful parking are rare affecting only between 1 – 2 % of its fleet in Singapore.

In almost all cases, helmets are not worn. This last bit presents a logistical problem for the companies as it entails renting out helmets – how does one do that? A logical solution would be a helmet vending machine but that is also susceptible to vandalism not to mention the cost of tracking each helmet! It is hence widely accepted that for the average distance of 3km per ride, a helmet is unnecessary.

REGULATING BIKE-SHARING

All these problems thankfully are solvable, except for roads that are unsuitable for bikes and longer distances – it is left to the bike-sharing companies to self-regulate; and they happily do so because it is in their own interest to protect their bikes from errant users.

The apps have come up with a demerit points system where any bike renter’s bad behaviour will see points deducted from their account. Singapore’s oBike, for instance, deducts 20 points for parking at non-designated bike parking areas and forgetting to lock a bike (which is not lost). For more serious offences like violation of traffic rules, adding a private lock, losing a bike or moving a bike illegally, the user’s points will be reduced to zero. For Mobike, when a user’s points reach a low threshold, he or she will be banned from using the app.

On the other hand, for good behaviour like reporting a broken bike, oBike users get an extra 2 points while reporting an illegally parked bike will earn the rider 3 points. The points influence users’ ride experience – the higher your credits, the more benefits you get while a lower credit score means your rides will cost more. Industry players hope the demerit points system will deter the bad riders while rewarding the good ones.

On the practical side, Mobike has a self-developed smart locking system and soon a metal-based QR code to prevent it from being scratched out. oBike meanwhile has recently launched a lighter and more ergonomic Smart Generation bicycles to cater to those with a smaller build.

oBikes can be dropped off anywhere as long as it’s a designated bike parking area – the app utilises its Bike Parking Location Indicators within its app and also uses Bluetooth technology to improve the location accuracy of its bicycles.

In Singapore, as part of a new framework developed by the Land Transport Authority and 15 PAP Town Councils, bike-sharing operators will be penalised if their bikes are not properly parked or they obstruct common areas in the neighbourhood like HDB estates.

The companies also have to remove bicycles that are illegally parked within four hours, if alerted by the town council between 8.30am and 7pm, and before 7am the following day if they are notified after 7pm. In addition, the bike-sharing platforms are obliged to provide third-party insurance covering accidents or bicycle damage; and provide travelling or cycling pattern information to the authorities – all of which are agreed to by the bike-sharing companies.

What about the refundable deposits that users place with the companies? These will presumably be invested by the company but governments need to oblige such companies to be more transparent by giving an account of the amount of refundable deposits they have. This will ensure users can get back their deposits anytime.

In Ofo’s case, with 30 million users providing deposits ranging from 100 – 300RMB each, that can add up to a lot. Even 1 yuan collected from 30 million users would mean 30 mil yuan, a substantial amount by any measure. This is clearly a volume business just like Uber or Grab; it requires a certain minimum number of users or rides to break even and generate revenue. The only way to go is to scale up, hence, the need to go global.

SCALING UP

For 2016, the number of smartphone users in the Asia-Pacific region is about 1,139.8 million which is estimated to increase to about 1,483.4 million by 2019, according to Statista. That’s a whole lot of untapped users even assuming half of them will never use the app.

The trick is to corner the market quickly by giving the most user-friendly app and bikes, and retaining loyalty through an attractive rewards programme. That’s what we are seeing now – the rush to expand by the top two China-based bike-sharing platforms with numerous others following suit.

While fees for each app vary in different cities and countries, there is one thing common among all of them – their back-end systems record millions of valuable users’ data, similar to any other sharing app. This may present a problem for users of apps that have a less secure system.

Realising the benefits of bike-sharing, governments especially municipal authorities are increasingly working hand in hand with these bike-sharing companies. This is because some of the facilities required to make it work overlap, for example, space for bike parking. While the bike racks can be provided by the companies, the municipal authorities’ help is needed to designate certain spots as bike parking areas as well as paving new bike lanes and even putting up traffic signs specifically for bikes.

If done right, this is truly one of those rare sustainable businesses that has sustainability at its heart. So, thumbs up for this latest app-enabled sharing craze.

This is one of the most, perhaps the most beneficial sharing application out there. It protects the environment, leaving less carbon footprint, while at the same time lowering transportation costs for commuters. Streets, buses and trains become less congested, the quality of air improves and along with it, the quality of life.

Speculation has it that ofo is eyeing the acquisition of Taiwan’s Giant Manufacturing Co, reputedly the world’s biggest bicycle maker. Acquiring Giant would strengthen ofo’s supply of bikes especially as it plans to expand overseas. Currently, bike-sharing companies in China source their bikes from various bike manufacturers there. What is jaw-dropping is that a 3-year old start-up is now able to swallow up a 45-year-old traditional bike manufacturer.

That points to a very bright future indeed for bike-sharing companies worldwide. Expect more bike-sharing in the near future as consumers warm up to it and realise its other benefit – a good workout while cycling.

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