components can be built in a short period of time, resulting in a fiercely competitive
market. With the support of capital, major companies have completed market
development in a relatively short time period, releasing numerous bicycles with
high subsidies and rapid expansion. Major companies are growing rapidly in large
cities with high levels of cycling and relatively stable user groups. By the end of
2017, Mobike and Ofo accounted for over 90% of the market. However, large
upfront investments and long-term price wars have left businesses with huge
debts, increased profit pressure, and business models that face great challenges. In
addition, since late 2017, issues such as the excessive release of bicycles, which
affects public spaces and order, have been widely debated. Many cities have
introduced cycling restrictions and strengthened the management and evaluation of
cycling operations and maintenance. In the midst of these changes, pressures on
business operations have also increased. Against this backdrop, the bicycle-sharing
market began to change significantly as capital market attitudes altered and financing
in key markets became increasingly difficult to obtain. In April 2018, Mobike was
bought outright by Meituan for 3.7 billion USD, including 1.2 billion USD in cash,
1.5 billion USD in shares, and one billion USD in debt. After maintaining brand
independence and operations for approximately 10 months in 2019, Ofo plunged
into operational difficulties and a debt crisis that led to a sharp reduction in the size of
its operations. As a late entry to the market, Harbin Bicycle has adopted a niche
market strategy to target regional cities, avoiding large cities, and its users and scale
have developed rapidly. Users are beginning to actively consider moving from a
single bicycle-sharing service to a combined mobility service that offers a shared
bicycle ride service and open entry with operators in other sectors.
In addition to its ambiguous and immature business model, serious flaws in
corporate governance structure, irregular user behavior, and inadequate public
management in cities, massive entry into the capital markets over a short period of
time has been a key cause of upheaval in the bicycle-sharing market. In less than
2 years from 2016 to the beginning of 2018, the bicycle-sharing industry has
received huge amounts of funding. The Ofo bicycle platform has undergone an
estimated ten rounds of financing, raising approximately 1.5 billion USD. Participating investors include well-known companies and investment institutions such as
Alibaba, Ant Financial, DiDi, and CITIC. Financing frequency, large sums of
money, and high popularity have been very rare in the history of Internet
development.
The enormous entry of operators to the massively capital-backed shared bicycle
market, excess vehicle production, and excessive competition across the market have
resulted in rollercoaster development of the industry, which has severely harmed
stakeholders, especially suppliers. Since 2016, short-term market distortion and high
levels of prosperity resulted in an overexpansion of production capacity in the
design, research and development, manufacturing, and marketing businesses associated with bicycle sharing. As the market shrank rapidly in 2018, the overcapacity
of shared bicycle-related manufacturers and companies became apparent. The number of bicycle manufacturers in Tianjin’s Wuqing town, known as the “first town of
bicycles,” has dropped from more than 500 at its peak in 2017 to less than 300 in
13 Social Innovation Toward a Low-Carbon Society
249
market. With the support of capital, major companies have completed market
development in a relatively short time period, releasing numerous bicycles with
high subsidies and rapid expansion. Major companies are growing rapidly in large
cities with high levels of cycling and relatively stable user groups. By the end of
2017, Mobike and Ofo accounted for over 90% of the market. However, large
upfront investments and long-term price wars have left businesses with huge
debts, increased profit pressure, and business models that face great challenges. In
addition, since late 2017, issues such as the excessive release of bicycles, which
affects public spaces and order, have been widely debated. Many cities have
introduced cycling restrictions and strengthened the management and evaluation of
cycling operations and maintenance. In the midst of these changes, pressures on
business operations have also increased. Against this backdrop, the bicycle-sharing
market began to change significantly as capital market attitudes altered and financing
in key markets became increasingly difficult to obtain. In April 2018, Mobike was
bought outright by Meituan for 3.7 billion USD, including 1.2 billion USD in cash,
1.5 billion USD in shares, and one billion USD in debt. After maintaining brand
independence and operations for approximately 10 months in 2019, Ofo plunged
into operational difficulties and a debt crisis that led to a sharp reduction in the size of
its operations. As a late entry to the market, Harbin Bicycle has adopted a niche
market strategy to target regional cities, avoiding large cities, and its users and scale
have developed rapidly. Users are beginning to actively consider moving from a
single bicycle-sharing service to a combined mobility service that offers a shared
bicycle ride service and open entry with operators in other sectors.
In addition to its ambiguous and immature business model, serious flaws in
corporate governance structure, irregular user behavior, and inadequate public
management in cities, massive entry into the capital markets over a short period of
time has been a key cause of upheaval in the bicycle-sharing market. In less than
2 years from 2016 to the beginning of 2018, the bicycle-sharing industry has
received huge amounts of funding. The Ofo bicycle platform has undergone an
estimated ten rounds of financing, raising approximately 1.5 billion USD. Participating investors include well-known companies and investment institutions such as
Alibaba, Ant Financial, DiDi, and CITIC. Financing frequency, large sums of
money, and high popularity have been very rare in the history of Internet
development.
The enormous entry of operators to the massively capital-backed shared bicycle
market, excess vehicle production, and excessive competition across the market have
resulted in rollercoaster development of the industry, which has severely harmed
stakeholders, especially suppliers. Since 2016, short-term market distortion and high
levels of prosperity resulted in an overexpansion of production capacity in the
design, research and development, manufacturing, and marketing businesses associated with bicycle sharing. As the market shrank rapidly in 2018, the overcapacity
of shared bicycle-related manufacturers and companies became apparent. The number of bicycle manufacturers in Tianjin’s Wuqing town, known as the “first town of
bicycles,” has dropped from more than 500 at its peak in 2017 to less than 300 in
13 Social Innovation Toward a Low-Carbon Society
249