In China, a bicycle-sharing phenomenon is changing the way urban dwellers get around – and forcing listed manufacturers to scramble to get a slice of the profits.
Across major cities such as Beijing and Shanghai, sidewalks are filling up with parked bikes that anyone with an app can unlock with a swipe of their phone. The cost is a few U.S. cents a hour, and users can dump the vehicle wherever they want, unlike rental schemes in Western cities where bicycles typically have to be returned to docking stations.
As competition grows more aggressive – with at least seven companies offering such services in Beijing alone – the biggest bicycle-makers are trying to get a slice of the boom. Their stocks have been in retreat as the emergence of bike sharing risks eroding sales already hit by China’s economic slowdown and competition from smaller manufacturers.
Taiwan’s Giant Manufacturing Co., the world’s largest cycle maker by market value, will deliver 600,000 bikes by the end of the year to Ofo Inc., a rental firm whose yellow two-wheelers command over half of the market in China. Shanghai Phoenix Enterprise Group Co., which has been making bikes in China since the 1950s, said this month that it will also supply Beijing-
based Ofo with at least 5 million bicycles.
Bike manufacturers are “are now at a crossroads,” said Rui Shi, a Beijing-based analyst at Internet consulting firm iResearch Consulting Group. “It’s inevitable that big bicycle manufacturers will seek cooperation with rental companies because the rise of ride-sharing will undermine their retail sales of low-end models.”
So far, the rental companies have relied on smaller manufacturers to supply basic models at a low cost. Tianjin Flying Pigeon Cycle Development Co. and Tianjin Fuji-ta Bicycle Co., both privately held, are among Ofo’s suppliers. Ofo’s chief rival Mobike built its signature orange-colored bikes, which use a GPS locking system, with the help of Foxconn Technology Group and Tianjin Aima Sport Goods Co., according to the Beijing Morning Post.
“Some listed bike manufacturers have been latecomers in joining the bike- sharing business,” said Wang Chenxi, an analyst with Analysys International, an Internet research firm in Beijing. “They are more cautious than small, private makers and take a much longer time to make decisions.”
While China’s bike-sharing startups are raking in venture capital, it’s not translating into stock gains for the larger manufacturers. Giant’s shares have fallen more than 30 percent over the past two years as the company reshuffled management amid falling profits. Bloomberg
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