BikeBiz Bicycle and cycling retail news
For all the talk of autonomous cars transforming cities it’s entirely possible that another high-tech form of transport – free-floating rental bicycles – could get there first. Think bicycles aren’t high-tech? Think again: some of the “dockless” bike-share bicycles now appearing in European and American cities are equipped with modems, GPS units and monitors that can report on road-surface conditions or flag where protected cycleways are needed. Some of these bikes will soon also be able to measure air quality in real-time.
In China, a dockless bike-share boom is reducing car use in cities and even leading to forecasts that less fossil fuel will be burned in the future.
Unlike Velib of Paris or the “Boris bikes” of London, dockless bikes don’t need docks – they can be picked up and left almost anywhere (although geo-fencing tech will soon aim to make sure they are located in designated “home zones”). Not having to pick-up or drop-off bikes at must-be-found docks makes them convenient for users, who use the bikes for “last mile” journeys they might otherwise have walked. In China, where the new-generation dockless bikes first appeared three years ago, the numbers of people cycling has doubled, reports Chinese urban transport consultancy Far East BRT. "I’ve been promoting cycling for ten years, not just in China but around the world, and it’s hard," Karl Fyellstrom, who works for the consultancy, told the BBC. "And then this bike sharing came along and it’s just revolutionary. I see this as really historic opportunity."
That’s a view shared by Shane Connaughton, a veteran of bicycle retail and manager of Urbo, a Dublin-based dockless company: “This is the most disruptive thing that’s happened to our industry for a long time,” he told BikeBiz earlier this year. “The cash that is being pumped into the sector is unprecedented in the bike world.”
The dockless bike share scene is attracting serious amounts of venture capital because of how the bikes are booked and paid for – they require smartphone apps linked to credit cards. Apple invested billions of dollars on iTunes not just to make money from selling music but also to capture credit-card details. And now that Apple Pay – and its Android equivalents – have become commonplace Google and Apple have become more than just computer companies they are now major financial-transaction players. Similarly, Uber is worth billions because it has become an essential app on peoples’ smartphones and it too only works when linked to a credit card. Some transport-share apps track users for a few minutes either side of their journeys, and this will be information that could one day be monetised, believe tech experts.
“Mobility as a service” (MaaS) – where forms of transport are not owned but rented per journey – is expected to become increasingly important in the years ahead and this has clear implications for companies that sell cars, and bikes.
“As a bike guy, I know the size of this industry, and dockless bike sharing is going to change everything,” Connaughton told BikeBiz.
A £1500 50-page report on the dockless sector said that the supply of dockless bikes was increasing by one million per month. Beijing alone has 2.35 million shared bikes.
At the start of 2016, Mobike of China, now the world’s biggest operator with approaching ten million bikes, operated one scheme in a district of Shanghai; by the end of its first year it had expanded to 100 cities. In June, Tencent, Sequoia Capital, TPG and Hillhouse raised a $600m investment pot for Mobike.
Ofo, the world’s second biggest operator, also has nearly 10 million bikes. It operates in thirteen countries, including the Czech Republic, Italy, Russia and the Netherlands. It was founded in 2014 and is valued at over $2 billion after raising over £541m in Series E financing round in July. Investors include Alibaba, Hony Capital and Citic Private Equity. By the end of the year, Ofo plans to have 20 million bikes on the road.
The dockless bike sector in China, while huge with 70 operators and 16 million cycles, has been beset with user-generated problems, notably the “dumping” of bicycles on pavements, leading to what detractors have said is “littering,” a claim rarely used by municipalities or motorists against parked cars.
“China’s bike-sharing craze is causing parking chaos, traffic congestion and is a safety hazard,” reported China Daily earlier today, stating that major cities are now at saturation point and have started to cap numbers of share bikes. Smaller operators – including some rogue ones – are being squeezed out by Mobike and Ofo, which are responding to concerns by improving their bikes and increasing the number of “street patrols” which redistribute bikes around cities, reducing clustering and cluttering. (Bike share schemes need two bike-distributing “street wardens” per 1,000 bikes, estimates UMS, a British logistics company.)
Outside of China the bike sharing companies are being careful to grow more slowly, choosing to partner with city authorities rather than “dump” bicycles on streets uninvited. Some have signed up to self-regulating codes of conduct, while cities such as Dublin have enacted laws to keep operators in check. Mobike launched in Manchester earlier this year with the approval of Mayor of Greater Manchester Andy Burnham, and will be installing 1,000 dockless bikes in Newcastle later this month, with plans to double this number.
Mobike has also partnered with British Cycling to increase usage of the schemes with a plan to “inspire two million more people to get on bikes.”
This potential to attract newbies to cycling could offset worries among bike shops and bike suppliers that bike share schemes are denting their businesses. (When it started in Cambridge, Ofo approached bike shops to be service partners for the bikes.)
A UK-wide survey of public bike share schemes by Bikeplus, representative body for the UK bike sharing sector, found that 23 percent of respondents were replacing car journeys with bike share trips, and that 23 percent had recently started or restarted cycling. Significantly, 18 percent of respondents said they had gone on to purchase their own bikes following regular use of bike share bikes.
Some global cycle companies – many of which have been making the frames and parts for China’s bike share bikes – worry that sales of complete bikes might be reduced by the ready availability of bike-share bikes. Japan’s Shimano reported that its bike-related sales were down 2.7 percent in the company’s first half, which ended June 30th, and attributed this dip to poor weather, but also poor sales of complete bikes in China. Giant of Taiwan, the world’s largest builder of quality bicycles, recently experienced a 20 percent drop in revenue from China, where it has a chain of branded shops. This was due, in part, to the bike share boom. However, Giant put a brave face on it, saying: "The short-term effect of bike sharing remains unclear [but] in the long run, Giant believes these services will have a positive impact in promoting cycling and increasing the cycling population.”
The reason for the brave face was because Giant is making some of the bikes that are eating into its retail earnings. It has supplied 600,000 bikes to Ofo, for instance. However, most of the bike-share bikes are being made by either smaller players or by makers of low-end bikes. Shanghai Phoenix, which has been making bikes in China since the 1950s, has made five million bicycles for Ofo. The Beijing Morning Post reports that low-end bicycle-makers Flying Pigeon and Fuji-ta are also making bikes for Ofo.
“Many of China’s bicycle manufacturers were on the verge of going bankrupt in early 2016 because of slow orders from customers around the world,” reported the Global Times earlier this year, “then seemingly out of nowhere the bike-sharing business took off.”
The global cycle industry has the annual capacity to make 60 million bikes; by the end of this year, dockless companies could account for nearly half of that capacity. Meiya has increased its output of cycle chains by 42 percent thanks to the bike-share boom, and other Chinese component companies are reporting that capacity is shifting to the high-volume, low-margin business, sometimes at the expense of orders for long-standing customers. A shortage of bike parts is driving up pricing in China, and due to demand, labour costs are also rising. This is leading some commentators to fear that the bike-share boom is a bubble about to burst.
This is denied by Mobike and others – they claim they are now making better, longer-lasting bikes and that expansion, especially outside of China, will continue for some time. Hu Weiwei, co-founder and president of Mobike, has told the media that growing to scale is her current priority, not profitability: “If we want to make money, we can, but making money is not our first goal.” Instead, she said Mobike was “focused on market expansion."
Despite their current trendiness dockless bike-share bikes have been around for some time. Oybike had a small fleet of such bikes in London in 2004, and NextBike has operated dockless bikes in many German cities for some years.
The first bike-share bikes were the famous “white bicycles” of Amsterdam, a small 1965 scheme by the Provo anarchists who wanted to reduce car usage. “The white bike symbolises simplicity and hygiene as opposed to the gaudiness and filth of the authoritarian car,” stated a Provo pamphlet. The scheme flopped but the idea was later taken up by other cities around the world before eventually docked bicycle schemes became popular in France from 2005 onwards.
British bike shops have yet to report any slackening in demand for new bikes thanks for dockless schemes in their cities, although this is hard to measure especially as the market for bicycles is already depressed. It’s possible that the sector to be most effected by dockless is the BSO one – “bicycle shaped objects” are the low-end bikes sold by supermarkets and the like. However, it’s also possible that demand for “Dutch-style” fully-equipped bikes will increase in the long-term because dockless bikes – like their docked cousins – are usually made with step-through frames and come equipped with mudguards, lights and front baskets.
In 2012, BikeBiz stated that bike-share bikes are like “horses: Trojan horses. They can popularise cycling by stealth. If your city starts toying with a scheme, don’t think of it as a threat to your business, it could be the very opposite.”
