Caixin
Aug 28, 2019 10:00 AM
TECH TALK

Shared Bike Wars 2.0: Didi, Meituan and Alibaba in New Race for China’s Sidewalks

Just when you thought it was safe to go back on the sidewalks, there comes: “Shared Bike Wars 2.0.”

OK, so maybe I’m dating myself a bit with the reference to the tagline from “Jaws 2,” the sequel to the 1975 box office blockbuster about a great white shark with a penchant for feasting on unwary swimmers. But the theme is slightly similar, since the shared bike wars of the past three years have feasted heavily on our sidewalks here in China, often crowding out regular pedestrians.

Just when that tide of bikes appeared to be rolling back with the fading of most early players, most notably former leader Ofo with its canary yellow bikes, a new invasion seems to be taking place. I did a little investigative sleuthing on the ground here in Beijing this past week, and quickly determined the latest invasion in this Shared Bike Wars 2.0 has three main backers.

Those three are: Didi Chuxing, the Uber-esque ride sharing specialist backed by Uber itself and global tech giant Apple, among many others; Meituan Dianping, which started out as Chinese version of group buying specialist Groupon and has since morphed into an online-to-offline services specialist with a focus on web-based takeout dining; and e-commerce giant Alibaba, which has been half-heartedly in the shared bike game since almost the outset.

I’ll explore shortly what each of these players brings to the table, and also do a quick recount of shared bike wars 1.0 for those coming late to the story. I’ll also offer some views on how this new round of bike wars is likely to end, following a prediction I made at the start of this year that was largely correct, for anyone who wants to read.

The one thing I didn’t really predict back then was this new round of bike wars, which has ratcheted up these last few weeks with the addition of thousands of new bikes on the streets of Beijing. The biggest difference between Bike Wars 1.0 and this new round is where the money’s coming from.

The first round was led by Ofo and Mobike, the latter known for its gray-and-orange bikes, as well as a number of smaller players. All of those were funded by a flood of more than $1 billion in venture capital, as well as personal money from founders who thought they could make a quick buck. Many of those smaller brands still litter the streets of Beijing, with my recent investigation turning up blasts from the recent past such as U-Bicycle and Kuqi

That venture funding element was a key factor behind the bust of Shared Bikes 1.0, since financial backers quickly grew tired of a business with no profit model and simply cut off the money taps. By comparison, Shared Bikes 2.0 has very deep-pocketed backers who, at least based of the number of bikes they’re putting on the road, have every intention of making sure they stay in business for at least the next few years.

Who’s in the driver’s seat?

All that said, let’s review each of the three big players in Shared Bikes 2.0 and their relative strengths and weaknesses. We’ll begin with Didi, which is throwing the bulk of its effort into its turquoise-colored DiDi Bikes, known as “Qingju” in Chinese, which were first launched in early 2018.

Didi’s biggest strength is the synergies it brings to the table, since at its heart the company is a transport services specialist. That means Didi, which also has ties to the older Ofo and Bluegogo brands through various investments, should theoretically be able to integrate bike services into its broader platforms to offer a wide range of products for people looking to get from A to B.

Didi’s big downside is that of the trio in this round of bike wars, its cash is the most limited because it’s still believed to be losing money. That could test the company if its investors finally tire of burning through cash and demand cuts of more problematic offerings like the shared bikes.

meituan

Meituan’s newly launched shared bikes are seen in a street in Nanjing, East China’s Jiangsu province on Aug. 17. Photo: VCG

Next there’s Meituan, which was also money-losing until it surprised everyone last week by announcing its first-ever quarterly profit. Meituan is now the owner of the older Mobike brand, but plans to phase that out and eventually migrate users to its own Meituan-branded bikes. Those newer bikes are sprouting up like weeds on the streets of Beijing these days, colored a shade of yellow that looks quite close to the old Ofo’s trademark canary yellow.

Meituan’s biggest drawback is figuring out where bikes fit into its universe. The company seems to think it can combine anything in the online-to-offline services realm to create a mega-pool of users and for such a wide array of offerings from restaurant ratings to shared bikes. I’m less convinced of that. I’m also far from convinced that the company’s surprise quarterly profit was not just a one-off thing using accounting tricks to make investors happy.

Finally there’s Alibaba, which from a cash perspective has plenty of resources to fund its Hellobike service for years to come. The problem with Alibaba, as is often the case, is that it’s not quite sure where shared bikes fit into its core e-commerce business. This is a constant problem for Alibaba, which loves to get into new areas without clear connection to its core competency, with the result that such initiatives often lack focus and appear half-hearted.

Surprisingly, many of the people I polled gave Alibaba the best chances of success in this second round of bike wars, probably because it has so much cash. Meituan was a runner-up, and nobody seemed very bullish on Didi. At the end of the day, I probably share the most sentiment with one of my friends who predicted no winners for this hopeless business model. “This is just another example of how Chinese companies swindle money from investors,” he said. “I expect we’ll just see our streets become a graveyard for countless more bikes.”

Doug Young has lived in Greater China for two decades, including a 10-year stint at Reuters, where he led China corporate news coverage. Send your questions or comments to DougYoung@caixin.com

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