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The bike-rental war is creating unsustainable demand for bikes

By Sheila Yu

China’s booming bike-sharing business has been disrupting the country’s traditional bike industry landscape, while also being acclaimed by city travelers for playing its part in cracking the hard nut of the last kilometer of their journey.

After receiving multi-billion RMB investments from 30-some institutional investors, major bike-sharing services Mobike, Ofo, and their competitors have been embarking on a manufacturing land grab, reaching out to medium and large-sized bicycle makers. They hope this will give them an edge in terms of production capacity, quality and design, for closer cooperation.

In the race for market share, bike-rental startups are pinning their hopes on putting into use more and more bicycles. Ofo has been expanding their cooperation with bicycle manufacturers such as Flying Pigeon, Phoenix-Bicycle, and Fuji-ta Bicycle, while its arch rival Mobike’s recent partnership with Foxconn is supposed to double the number of bicycles it plans to make this year to 10 million.

The influx of capital has brought in a surge of bicycle orders, invigorating the moribund bicycle making industry, which has suffered a decline in sales in recent years due to poor channel marketing and brand protection.

According to the China Bicycle Association, roughly 15 to 20 bike-sharing startups have emerged in the country since 2016, placing on the streets more than 2 million (in Chinese) bicycles in total in over 30 cities. In 2017, the total count may approximate 20 million. The figure may be even higher given that the actual production capacity of Mobike and Ofo each is estimated to reach 15 million (in Chinese) bicycles this year.

China makes around 80 million (in Chinese) bicycles every year, around 25 million of which are sold at home, according to the China Bicycle Association. That means the production capacity of the two bike-sharing startups could surpass the domestic demand (in Chinese) for 2017, and an industry glut may be around the corner.

In addition, the tie-up with bike-rental businesses can be a double-edged sword: sure, they’re getting more orders, but this could lead to a marginalization of the brands, a reduction of the bike categories, and a chaotic reshuffle of the current industry leading to the closure of smaller companies.

TechNode has reached to both Mobike and Ofo for comments on this story, but have not gotten a response. We will update if and when the companies comment.

Source:: The bike-rental war is creating unsustainable demand for bikes

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