Statistics showed that there are nearly 50 players in China's domestic bike-sharing industry. Ofo and Mobike, China’s two leading bike-sharing companies, even have access to 1.3 billion U. S. dollars in the latest round of financing. However, no company has achieved profitability so far. What is the business logic behind this phenomenon? What will be the future development trend?
Ofo: explosive growth for bike-sharing industry over past 6 months
According to data, more than 20 million bikes have been launched by nearly 50 bike-sharing companies at present. In the past six months, bike-sharing industry has ushered in an explosive growth. Mobike announced in late June that it has taken up nearly 60 percent market share. In early July, Ofo said it has already launched 6.5 million bikes.
“In December 2016, our daily orders totaled around 1 million. In the past six months, our daily orders have skyrocketed from 1 million to 25 million,” said Shi Shaochen, director of the public relation department of Ofo.
Capital market: optimistic about bike-sharing industry in the long run
No company has realized profitability so far. According to Li Yi, a chief analyst with the Internet Research Center of Shanghai Academy of Social Sciences, the phenomenon shows an optimistic attitude of the capital market towards bike-sharing industry as there lacks good projects.
“Many Internet-based companies suffer long-standing losses, with Amazon the most typical case. This company has been in the red for nearly two decades. However, this has neither stopped Amazon from emerging as a very successful company, nor stopped it from gaining continuous profits in recent years. In my opinion, investors also deeply understand this law. Therefore, they are not afraid of running losses,” Li Yi added.
Expert: bike-sharing firms likely to move towards oligopolistic M&A
While some bike-sharing enterprises manage to secure financing, others have to close down. According to Li Yi, as implied by the law of market development, the bike-sharing industry is likely to follow suit of the online taxi-hailing industry and ultimately move towards oligopolistic M&A.
“In the past, there were seemingly many suppliers and Internet companies in search engine, e-commerce and social networks fields. However, deep insight into market share and profit scale showed that a pattern of tripartite confrontation actually prevailed. After M&A in the online taxi-hailing industry, merely Didi Chuxing dominated market. Therefore, the fate of bike-sharing industry is likely to be similar to that of online taxi-hailing industry, leaving only one company emerging out of oligopolistic M&A,” said Li Yi.
In the meanwhile, many experts pointed out that the layout stage in bike-sharing industry has already finished despite unclear profit pattern. However, dependence on information and big data extraction will be the future trend. Therefore, newcomers in bike-sharing industry are advised to tap into a certain city or region rather than blindly expanding market share.
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