Will power bank rental startups survive as oversupply emerges?

As the bike-sharing battle has seemingly come to a clear conclusion, the competition in another vertical of the “sharing economy”— power bank rentals — has just started.

Earlier this year, investors in China have poured in RMB 1.2 billion (USD 174 million) worth of funds into power bank rental startups within 40 days, local media reported. However, the heated competition has reached a phase where the startups are seeing an oversupply of power bank rentals.

Yuan Bingsong, the founder and CEO of Laidian, said last week at a conference in Hangzhou that the industry has pocketed a massive amount of funds and the competition is getting fierce. However, he suggested that the oversupply situation has emerged.

“When the development of a power bank rental startup hits a certain stage, the situation of oversupply may appear. This has already happened in Shanghai and Beijing,” he said. “This is indeed a problem.”

Founded in 2014, Laidian in April landed USD 20 million in its Series A financing round from SIG and Redpoint Ventures China. The company provides portable power banks for rent that allow users to take away and return the rented power banks at designated stations. Another startup Ankerbox adopted the same approach, while Xiaodian placed fixed charging stations in public spaces such as restaurants and subway stations. Most companies charge almost nothing for the first hour of rental, and charge RMB 1 per hour or so after that.

A Laidian station. Photo from Weibo.
A Laidian station. Photo from Weibo.

In fact, the business model of these power bank rental startups remains unclear. Yuan also suggested that the companies in the industry are not yet ready with their untested business models, and the cycle of product upgrades is longer than expected as well.

“It is hard to ‘end the battle’ this year,” said Yuan in the conference. “It may take two years for winners to emerge,” he added.

Yuan is right. The unclear business models are major hurdles for these startups. It has come down to a race of which company can first figure out its plan to monetize. And yes, speed is key as well. After all, the demand for this convenient service may decrease as technology evolves. Many smartphones nowadays come with long battery lives, and most of them can support one charge per day.

Moreover, it is not much of a hassle to carry our own power banks around as well. This is certainly different from shared bikes which are difficult to carry around but provide users an easier way to commute. It is totally fair to say that there is more demand for bike rental services, but not so much for power bank rentals.

However, these startups do hold an advantage. Power bank rentals do not have regulatory issues like bike-sharing. It is a huge shortfall for bike-sharing startups when it comes to regulations as local governments are not so tolerant towards random parking of bicycles on the streets.

“We surely don’t have regulatory issues,” said Yuan. “But the frequency of usage is a lot less than bike-sharing.”

Yuan’s concern about the oversupply situation is legitimate. The oversupply of power bank rentals available in China’s two major cities has once again proven that the low demand for power bank rentals remains an issue. This is definitely an urgent problem for startups to tackle.

(Top photo from Baidu images)