China's cycling start-ups pedal toward profits amid fierce competition

Updated 2017-05-03 14:30:26 CGTN

China's bike-sharing market is booming amid fierce competition. Two leading start-ups, Ofo and Mobike, have both raised hundreds of millions of dollars in U.S. venture capital. However they have different business strategies for managing their bikes, as they struggle to make a profit.

China's bike-sharing start-up Ofo tries to dominate the market by dumping several trucks of bikes at one location at a time.

"We put these bikes at subway stations before morning rush hour, and then key office buildings before evening rush hour. Sometimes the demand is so high that these bikes can be used up in a few minutes. If our bikes are there and other brands' are not, we win the customers," Chen Shunqiang from Ofo's operation team, told CGTN's reporter Han Peng.

Between morning and evening rush hours, Chen's job is finding broken bikes. Ofo says it needs one person like Chen to maintain 50 bikes. Based on those numbers, Ofo has to keep a massive team of roughly 30,000 technicians like Chen to take care of their 1.5 million yellow bikes across China.

The start-up recently raised 450 million U.S. dollars in venture capital, and saw its valuation climb above the billion U.S. dollar mark in just over a year. But it is just one of the many companies that are riding the wave of the rising bike-sharing industry.

In Beijing alone, there are over 20 brands already. In this crowded market, another billion-dollar start-up is Mobike. Unlike Ofo, Mobike claims to have a smarter, and less costly, way of managing their bikes.

"Each bicycle has a SIM card and GPS, which is able to tell where they are and communicate with the headquarters at real time. So we know where they are and we know the status of each one. So it's definitely a smart bicycle solution for Mobike," said Xia Yiping, Mobike Chief Technology Officer.

Xia also says the company also provides so-called "bonus bikes," which offers users money to choose the bikes that are not in use after 48 hours. But these technologies make each Mobike way more expensive than Ofo's ordinary yellow bikes. Which strategy is more cost-effective? Both start-ups refuse to comment.

While part of a sharing economy that is easing pollution with transport that doesn't burn fuel but in chasing profits, these two startups are still burning a lot of cash.

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