/Is the world’s largest bikeshare business profitable?

Is the world’s largest bikeshare business profitable?

Mobike is currently the world’s largest bikeshare startup program, if you haven’t yet heard about it. It expanded so quickly! Mobike launched their first bikes in Shanghai in April, 2016. In December, 2016, Mobike launched their 100,000th bike in Shanghai, meaning that Shanghai has the world’s largest bike share program.

Some history

Users download the app and pay the CNY 299 (about 44USD) deposit for initial setup. Users can locate the available bikes and scan the barcode to unlock the bikes. Returning the bikes is simple: Mobike doesn’t require the use of traditional, stationary parking docks. Users can return the bike to almost any area.

The manufacture cost of a single Mobike is around CNY 1,000. The rental fee is as low as CNY 1 for one hour. Mobike doesn’t incorporate any advertisement placement on their vehicles. How can they get returns on their investment? The founder and the CEO said that they are aiming to solve the urban “last-mile problem” and aren’t thinking too much about profits in the beginning.

Don’t worry about how they’re going to survive! In January, 2017, Mobike announced a USD 215 million Series D funding round. Prior to this, they received USD 110 million in Series B and C funding. Recently, Singapore’s Temasek invested an undisclosed amount of funding for Mobike’s expansion plan in Singapore.

Do you think that Mobike doesn’t make money, in comparison to the high cost of the bikes and maintenance? I don’t believe this to be the case.

Let’s look at New York City: the second largest public-private bike share program (Paris is the largest) cost USD 45 million to build the required docks, stations, and other infrastructure. Mobike doesn’t need this infrastructure in most cases. In terms of operation and maintenance (O&M), Mobike doesn’t rebalance the bikes and doesn’t need to maintain any stations. Citi Bike releases monthly reports for O&M and revenue, but I highly doubt that the private Mobike will release such a detailed report, even on an annual basis.

Mobike
(Photo from Baidu Images)

Existing issues

Many similar business models have emerged since the launch of Mobike in China. The most competitive one is ofo, which started in Beijing. Bear in mind, ofo’s most famous investor is Didi Chuxing, the Chinese version of Uber, which fully dominates ride-hailing in China. Electrical bike share programs have also appeared on the street since then. More players have created more unpredictable problems regarding safety and space conflicts.

In December, 2016, there have been many issues around public bike share programs in many cities in China. There have been conflicts between public bike riders and private bike riders in the limited parking area. There are also conflicts between bike riders and non-riders over street safety. There is no way for police officers to identify a public bike rider who disobeys traffic rules and jeopardizes public safety. Again, I would like to mention Citi Bike’s monthly report which includes all the incidents and O&M observations: In the report, I can find action plans and an actual performance rate regarding O&M problems. You can read the January 2017 report if you are interested in knowing more about a serious program.

I attended “the 100,000th bike launch event” in Shanghai last December. Mobike invited urban planners, law enforcement departments, academic and industrial experts, and journalists. At the event, Mobike showed their passion for expansion. At the end of the event, Mobike released a so-called “consensus”. But in my view, it was not a consensus at all. They appealed to the local government to help build infrastructure for both biking and parking. It is very unusual in China to see a private startup giving pressure to the government in such a way.

Companies who have created new problems should refine the rules and incorporate a credit/penalty mechanism, rather crying for government support. Building infrastructure requires large capital coming from all the taxpayers. Why should taxpayers pay for a private company?

The fundamental question is why the government should only support Mobike. The government needs to support low-carbon vehicles, which include all bikes, electric bikes, electric cars, and public transportation.

New concerns

Mobike’s deposits suddenly became a hot topic over the past week, something which was not surprising. Both Paris and NYC bike share programs rely on advertising sponsors and a membership fee for infrastructure and O&M spending. They are both public-private owned programs, which means that the local governments are the biggest supporters. How can a private Mobike, without sponsorship, keep the world’s largest bike share program running? First of all, they have a significant amount of funds. Secondly, there are the deposits which they could use for other purposes.

The accumulated sum of the deposits from all the active Mobike users was about USD 131 million by the end of 2016, and is estimated to have reached USD 255 million in February, 2017. Apparently Mobike doesn’t need this amount of money for O&M: Mobike told CCTV that they have set up a dedicated bank account and won’t use the deposits for other types of investment.

Surprising? No.

The early stage of Mobike sounded like a good dream, bringing low-carbon vehicles to China. Environmental benefits actually play a highly visible role in Mobike’s marketing and PR strategies, for the general public and local government. Does it sound appealing for investors? I don’t think so. Looking at it from an environmental perspective:

Myth 1: carbon-free

Mobike is a low-carbon form of transportation, but it is not a carbon-free solution. The production of the bikes consumes energy: most likely, dirty power from the grid in China. The operation of the company requires energy. Thinking about the embodied energy will help you better understand the concept of carbon-free or carbon-neutral. Mobike doesn’t generate power, which means it will never be carbon-neutral.

Myth 2: reducing carbon emissions

Is there any independent data source showing that Mobike is an alternative for high-carbon intensive vehicles? Does Mobike only replace walking? Do people keep all their old habits, and use Mobike only for recreational or fitness purposes? The data should include the energy used during the production, O&M of the bike, as well as all the office work. Only data can tell if Mobike is lowering carbon emissions, rather increasing them.

Myth 3: a company strives for environmental benefits as claimed

The Mobike company page on LinkedIn says that they are a 1,001-5,000-employee internet company: not an environmental services company, an internet company. A private company does need to think about how to benefit all the stakeholders. A company should be able to make money ethically and disclose what they are doing with the deposits.

Putting green labels to their business helps them stand out among other start-ups. But what made me feel uncomfortable is the apparent greenwashing. “Greenwashing”, for those who are unfamiliar with the term, is when a company or organization claims to be “green” through advertising and marketing, rather than by actually implementing business practices that minimize environmental impact. Mobike is marketing itself in one way, but making revenue in another.

(Top photo from Mobike)

Fang Yuan is originally from Shanghai and now lives in New York. She is a Certified Passive House Consultant and works on sustainable building consulting. She believes that technology helps people and the environment if it is being used mindfully.