Shared bike shake-up

Updated 2018-04-11 13:46:02

Meituan's takeover of Mobike intensifies battle between Alibaba and Tencent

Mobike, a major bike-sharing firm in China, was acquired on April 4 by Chinese group-buying firm Meituan-Dianping, which is backed by internet giant Tencent Holdings Ltd. The deal reflects some of the difficulties that shared bike operators have been facing lately that are likely to reshape the landscape of the bike-sharing sector. Meanwhile, industry representatives say that the bike-sharing business should be more than a capital-driven game. Instead, the essence of this business model should still be part of the public transportation system.

On April 4, Chinese bike-sharing company Mobike announced in Beijing that it had been bought by Chinese group-buying company Meituan-Dianping for .7 billion.

"I hope to see this deal in a more positive way, which does not mean we are out of the game," Hu Weiwei, one of the co-founders of Mobike, said in a post published on her WeChat account shortly after the deal was announced, according to media reports.

However, some senior executives of Mobike hold different views on the deal.

The company's CEO Wang Xiaofeng was quoted as saying in the reports that he had been insisting on independent operations, but that Chinese start-ups can never escape the control of internet giants.

In the second half of 2017, China's bike-sharing sector started to become more mature, as authorities in several cities banned other shared bikes from entering the market due to oversupply concerns, so Mobike is now set on the ambition to conquer a larger market share in the domestic market, as well as in foreign markets.

As of the end of 2017, 77 companies in the country were engaged in the bike-sharing business, putting an accumulative volume of 23 million bikes into the market, according to an annual report released by domestic e-commerce research website 100ec.cn in March.

However, since July 2017, bike-sharing firms have been facing more difficulties and experiencing "a market reshuffle moment," especially as some major players like Bluegogo and 3VBike went bankrupt.

Meanwhile, other serious problems broke out in the industry, the report said. For instance, some bike-sharing firms that declared bankruptcy had trouble refunding users' deposits, and a swarm of shared bikes began severely clogging up China's walkways and public spaces.

While a bike-sharing war spread across the country, firms reportedly began struggling to generate profits.

Mobike had no other choice but to face Meituan's buyout, domestic tech news site huxiu.com reported on April 4. And in December 2017, the bike-sharing firm recorded monthly revenue of 110 million yuan (.43 million), but saw its cost and management spending reach 791 million yuan, according to a report from huxiu.com.

Still, Mobike said in a statement sent to the Global Times on April 4 that Meituan's acquisition of the firm would help provide users with "a full spectrum of experiences," while maintaining its control of brand image and operations after the takeover.

"It's difficult for Chinese bike-sharing companies to go alone without the help of capital," Zhao Xiang, an industry analyst at Beijing-based market consultancy Analysis International, told the Global Times.

"Mobike is now backed by Tencent [Holdings Ltd] while its major rivals ofo and Hellobike are both backed by Alibaba [Group Holding Ltd], so eventually, it has become a war between Tencent and Alibaba for more market access," she said.

"Also, the deal has lowered the chance for a potential merger of ofo and Mobike," she remarked.

Capital-driven business

Echoing the huxiu.com report, a source close to Mobike's management team told the Global Times that Wang, the company's CEO, could not help but accept the Meituan buyout, although he had always insisted on independent operations while reiterating that the major goal of the business is to complement the traditional public transportation system and serve the public.

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