Mobike vs Ofo: a bike-sharing battle
China is revolutionising bike-sharing.
Traditionally, bike-sharing services have centred around designated pick-up and drop-off stations, however, this is no longer the norm in China. Numerous companies have realised the advantages that modern widespread smartphone usage provides and are changing the way people hire bikes.
If you take a short walk around any of China’s major cities you will pass tens of brightly colours bikes littering the pavements which can be rented simply by scanning the bike’s QR code. The bike is then yours to use freely, dropping it off wherever you like, for under $0.15.
Although there seem to be new competitors arriving on a monthly basis, two services stand clear as the main players: Mobike and Ofo. Since 2015, Ofo claim to have deployed approximately 250,000 bikes around 40 of China’s largest cities whilst Mobike say they have more than 100,000 bikes in Shanghai alone, whilst also expanding into 16 other cities.
How do they compare?
Mobike currently holds the largest share of China’s 4.3 million monthly user strong bike-sharing market, at 73% to Ofo’s 22%. It also collects an average of 107,900 payments per day, whilst Ofo receives only 23,100.
Although neither company currently generates much profit, the last two years have seen both announcing several new investors and recently, Ofo becoming the first bike-sharing company to achieve a $1 billion valuation. To date, Ofo has secured in excess of $635 million while Mobike has raised an estimated $560 million. Both sets of investors boast some of China’s biggest names, including smartphone manufacturer Xiaomi, ride-hailing mogul Didi into Ofo and internet giant Tencent into Mobike.
Most of this investment is being channelled into international expansion. Ofo has already launched in Singapore and the UK whilst Mobike are launching abroad for the first time later this month in Singapore.
Will it last?
Given their current rates of growth it is hard to imagine China’s City streets to be without the now familiar yellow or orange bikes any time soon, however, there are some issues with which both companies will have to content in the near future. Most obviously is the issue of damage to the bikes, whether due to wear and tear or the reported vandalism that has been an issue in some areas, both companies must provide reliable performance or risk loss of trust which will lead to customers defecting to alternative transport methods.
They must also learn from the power struggle between Didi and Uber that was eventually settled at the end of 2016. Since then, Didi has experienced countless issues, mostly due to the changes that they’ve had to introduce to make up for the expense of the war with Uber. Whilst in its infancy, the Ofo and Mobike relationship could easily see a similarly destructive tussle emerge which is more likely to cripple the industry in the long run.
Both companies should be well placed to learn from the Uber-Didi war. The founder of Mobike, Yiping Xia, was an executive at Uber China and the partnership of Ofo with Didi should also provide an advice structure should these two companies go head to head in the future.
It will be interesting to see how both companies continue to innovate so as to continue their growth in China and also whether the West is willing to adopt this new model for bike-sharing. Certainly, this is only the beginning of this bike-sharing story.