China Sees First Shared-Bike Merger

China is seeing the first merger in its fast-developing bike-sharing industry — a sign of maturation and consolidation of the market.

Youon Bike signed an agreement to combine its bike-sharing unit with Hello Bike, the former said in a statement on Tuesday. The announcement was later confirmed by Hello Bike, but details of the deal have yet to be disclosed.

Jiangsu-based Youon has traditionally focused on selling and managing city-run bike-rental systems, with fixed return docks distributed on major roads. Since early 2016, however, these city systems have begun to be overtaken by private bike-sharing services, which allow users to unlock bikes via a smartphone app and park them essentially anywhere on a sidewalk or public space.

The industry has seen a frenzy of nearly two dozen competitors pop up across the country over the last two years. But the expensive and cutthroat market has caused several smaller startups, including Wukong and 3Vbike, to go bankrupt.

Hello Bike is a distant third in the sector, behind Beijing Mobike Technology Co. Ltd. and Ofo Inc., according to statistics from consultancy QuestMobile. With the merger, Youon hopes to crack their duopoly.

But industry experts say smaller players should focus more on increasing service quality rather than their respective user bases.

“As the industry enters its ‘later’ stage, providing refined services, rather than clients, is more important,” said Wu Dong, a professor at Zhejiang University’s School of Management.

“Smaller players can adopt diversified competition strategies; for example, by focusing on special areas such as scenic attractions or parks that have traditionally been neglected by the big players.”

Additionally, the regulatory environment in the industry has tightened. Last month, Beijing joined a growing list of cities barring new shared bikes over concerns that the randomly parked rental two-wheelers are creating chaos on sidewalks and other pedestrian areas.

“The fierce competition and regulatory environment mean that winter is coming for the industry, and we can expect more mergers in the future,” Wu said.

Contact reporter Mo Yelin (yelinmo@caixin.com)