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Is it the end of road for bike-sharing firms?

ANI  |  Asia 

[Singapore], Mar 11 (ANI): There have been strong rumours that Mobike, one of the Chinese companies that pioneered dockless bike-sharing around the is closing its international operations to focus on its home market.

reported that Mobike, once a darling, is laying off its operations teams in including about 15 full-time employees, contract and third-party agency staff in Singapore,Malaysia, Thailand, and

If the rumours are accurate, this could be the first step in a movethat may see eventually withdrawing its operations internationally and focusing on

Bike-sharing or cycle renting was started as a cycling club project in 2014 to focus on bicycle tourism. It eventually morphed into bike-sharing and Ofo was the company that was launched as a result with initial funding from a alumnus.

Although the name "bike-sharing" suggests that users are sharing their bicycles, it is the company that owns and rents the bicycle to users. Users usually pay a small deposit for the right to use the bicycle and hire the bike using a mobile app which scans a QR code on the bicycle to unlock it and make payment.

Payment is usually cashless via a mobile payment facilitator.

The bicycles are of simple construction and made cheaply using a without gears and solid puncture-proof tires. There is an as well as locator built-in.

The concept behind this business was to solve the last mile problem faced by people commuting daily between their homes and public transport when this last mile is beyond comfortable walking distance. It also caters to longer rides in towns and cities which attracts a large number of tourists or people cyclingfor leisure.

Tencent-backed is not the first Chinese bike sharing company to enter Ofo was.

Ofo by the time it entered had from Chinese Xiaomi, and It reached a valuation of USD two billion when led an investment round that injected USD 866 million into the company in March of last year.

Despite being flushed with cash, Ofo which was fully operational in Pune and and was running pilot projects in seven other cities announced that it is pulling out of India. This was just afterseven months in the market.

In May 2018, Mobike, China's largest bicycle sharing start-up, announced launch plans in India starting in Pune and expanding to 10 other cities in the next 18 months.

In Pune, it partnered local municipal authorities to spread awareness of the benefits of using shared bicycles, starting in the western suburb of Kothrud. It signed an agreement with the Pune Municipal Corporation, to operate in support of the municipality's ambitious Pune Cycle Plan.

There are also a handful of local start-ups in this space like Gurugram-based Mobycy and Bengaluru's Yulu and Zoomcar.

with over 9 million orange bicycles operating in over 200 cities across 16 was taken over by and retail delivery platform Meituan-Dianping, for USD 2.7 billion in April 2018.

Before this, it had raised more than USD 900 million from investors such as Tencent, Foxconn, and

Between 2017 to 2018, Mobike expanded operations to Singapore, Malaysia, Japan, Israel, Australia, UK, Germany, Italy, Netherlands, France, Albania, Mexico, and the US. It has since pulled out of some locations.

Why have bike-sharing companies not been as successful as some of their investors envisaged?

In with low cost of living, low rentals were charged to make bicycle sharing attractive to the masses. In this business, high capital expenditure is required to build and deploy the bicycles in large numbers. Ultimately in these countries, mounting costs and low revenues meant the business was unprofitable and unsustainable even with a long-term view.

In theory, these rental bicycles could be parked anywhere because they have GPS-locators. However, this did not take into account that many users would park the bicycles wherever they wanted at their convenience. They were blocking pedestrian walkways, pavements, public and handicap access areas causing clutter and obstruction.

This became so unsightly and so inconvenienced the general public that many complaints eventuated. As a result, municipal authorities put in place regulations which added to the costs of bike-sharing companies.

In and Sydney, authorities had to hire disposal crews to cart away and destroy many of these bicycles which were in the way of public facilities or piled up in

There were also situations where bicycles were abused and abandoned. In Singapore, there were reports of people throwing bicycles down high-rise flats, into canals and rivers.

Unlike or Airbnb, bike-sharing has no private ownership of physical assets and hence there is a lack of responsibility on the part of users. This has resulted in such a large number of theft and vandalism that some bike-sharing firms have withdrawn from the UK because of high replacement costs.

In India, many cities lack bicycle lanes and proper pavements. This coupled with heavily congested roads creates a danger to cyclists. Furthermore, the low costs of bicycles may make it more economical to buy than to rent.

As of February last year, the reported that over 20 out of 77 bike-sharing start- ups have shut down; five bike-sharing companies have gone bankrupt. Up to USD 150 million in deposits could not be refunded to users.

In Singapore, Singapore-based oBike ceased operations last June and is now at the centre of a police investigation around alleged misuses of users' deposits.

In spite of these setbacks, bike-sharing companies have been making optimistic comments in public.

They appear to be shutting businesses in where the economics of bike sharing does not work and focusing on countries where they can survive and maybe thrive.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, March 11 2019. 07:44 IST