Chinese bike sharing startups are getting involved in a heated battle seeking market growth outside China. Two leading startups announced overseas strategies this month with Mobike having just completed a USD 215 million investment choosing Singapore as its first overseas expansion project, and ofo which is backed by Didi Chuxing, is planning to enter Silicon Valley and London, according to Tencent Tech. Their bold moves to target those comparatively developed markets as their new battlefields – is it a smart move or not?
Starting from Silicon Valley
One demand of bike sharing which is the same in both domestic and overseas markets is the inconvenience caused by limited public transportation within closed or semi-closed areas like parks or campuses.
Bike sharing is nothing new for Silicon Valley. Google launched Google bikes in 2007. Facebook, Twitter and other tech companies also provide cycling service to their staff as well. Ofo will have to face challenges if these areas become their targeted markets. One strong function that the ofo app provides is GPS location for bikes. A key to success for ofo’s overseas expansion may be to provide better functions than its competitors.
There is also a chance for Chinese bike sharing companies to break into the campus market. Zipbike, a college campus car and bike share program by Zipcar and Zagster, has launched the program in 15 schools by end 2016. Therefore, there could be some market opportunities for Chinese companies as the Zipbike program will only officially launch in January 2017.
Meanwhile, Chinese companies need to reach consensus on cooperation with universities in advance. As of yet, no Chinese company has disclosed any information on campus business plans.
Another demand of bike sharing comes from commuting. Big cities in China have large-scale public transportation systems because of their highly densed populations and traffic congestion problems. Meanwhile, people in large American or European cities mostly commute by car. Cycling plays a less essential role in other developed countries than China.
A survey by the American Public Transportation Association (APTA) states that 65 percent of interviewees use bus and subway, 11 per cent use bike sharing, and 12 per cent use car-sharing. Meanwhile in Singapore, which Mobike is venturing to, daily commute by cycling only stands at 1.5 percent.
Nevertheless, expansion opportunities for bike sharing still exist. New York City’s bike sharing system Citi Bike continues to grow for the third consecutive year with a ridership record of close to 14 million trips in 2016, breaking 2015’s record by more than 4 million trips.
Lower cost strategy
“Made in China” is often associated with lower costs in manufacturing. Thus, ofo and Mobike have different strategies in manufacturing bicycles to their advantage. Mobike mostly does its own research and development to make their own bicycles, whereas ofo chose domestic bike maker Phoenix Bicycles for overseas development.
There is money to be made, ofo claims. One bicycle will cost USD300 if it is made in the United States, but it will only cost USD100 if it is made in China and delivered to the United States, according to ofo.
Ofo can also use the card of ”employment rate” while they are lobbying local governments like the United Kingdom. They plan to hire one person to operate 1,000 bicycles. This proposition could attract local governments.
(Top photo from Pexels.com)