Cycling

A bike sharing king crowned – but valiant knights will fall yet

By Kitty Knowles 7 August 2017
Summary

This $384m business proves bike sharing can be profitable. But not for everyone.

Bike sharing businesses are booming.

Huge uptake in China has seen companies expand across the world, with Mobike launching in Manchester, and Ofo take on Cambridge. Soon Bluegogo will try its luck in San Francisco.

But while apparently popular in Asia, these companies have divided opinion in the UK – both pleasing would-be cyclists, and offending local residents who wake up to find cycles dumped in their doorways.

There have also been some major casualties along the way – one Chinese business made the killer mistake of allowing 90% of its bikes to be stolen.

Read more: Why bolshy ‘sharing’ companies are the ultimate party crashers

Flawed finances

Behind the scenes, investors are also often quick to point to another problem: even if teething problems can be overcome, many believe bike sharing to be economically flawed.

‘It’s like Uber’, they say.

The service might be huge, but with high overheads and low margins, these companies can never possibly make any money.

Today we say, yes they can.

Changzhou Youon Public Bicycle System Co. Pic: Getty/VCG / Contributor

Making millions?

This week, one bike sharing leader, Changzhou Youon Public Bicycle System, has become the first publicly listed bike-sharing company in China.

With 7.5m users, 50,000 bicycles, and revenues rising 20.5% year-on-year, it aims to raise Rmb644.4m (£73m) – and to be valued at £294m.

Youon plans to use the funds to build a research and development centre, improve daily operations and pay off some of its debts.

Oh, and its business is profitable – making about £3m this year alone.

Tom Hares (left) co-founded Buzzbike with Andrew Nunn. Pic: Buzzbike.

Big winners – and losers

Youon’s success shows that bike sharing can be big business.

But it won’t be easy, with many smaller or less expansive businesses falling by the way side.

“There is opportunity for profit, but I think there will be way more losers than winners,” Tom Hares, the founder of Britain’s home grown bike sharing business Buzzbike, told The Memo.

“We’ll see 1-2 eventual winners as companies fall away and others consolidate.”

In a challenging market, it’s easy for bike sharing companies to go boom and bust. But investors would be foolish to write them off as non-profitable.

There’s hope for businesses trying to pushing forward. Just don’t lose your bikes.

Read more:

London’s free Buzzbikes to resign ‘Boris bikes’ to the gutter