BEIJING: Following last month’s bankruptcy of China’s third-largest bike-sharing company, there is growing speculation that two or more of the remaining major players may be forced to merge to have any chance of becoming profitable.

China has made the debatable claim that that bike-sharing is one of the country’s “four new great inventions” in modern times, but that was before the sector’s current problems became apparent.

Investors have sunk billions of dollars into bike-sharing start-ups that allow users to unlock a GPS-enabled bike with a smartphone, use it for a short time before dropping it off anywhere without the need to park it at a dock.

But a combination of theft, vandalism, oversupply and an inability to make money - rides cost only a few yuan and companies have yet to monetise the data they collect - has led to the collapse of many operators in recent months.

“The gold rush is over,” according to Shi Rui, an analyst with Beijing-based consultancy iResearch.

“Smaller companies won’t survive unless they get more funding,” Shi told the South China Morning Post. “As investors become more cautious, merging with a well-capitalised bigger player can increase their chances of survival.” Youon Bike recently merged with Hellobike for example. 

While investors may be keen to avoid companies burning through their cash in an all-or-nothing race, the China Daily reported that chief executives of the two largest bike-sharing companies, Mobile and Ofo, have rejected the idea they might merge.

“Mobike versus Ofo is not just a battle between the two companies, but the whole ecosystem of services that their [respective] backers Tencent and Alibaba have created,” Xue Yu, analyst at research company IDC, told the Financial Times.

Ofo has ties with Alibaba and its Sesame Credit service to make it simple for riders to make a deposit, while Mobike uses Tencent’s WeChat to allow riders to use its bikes five times a week without paying a deposit.

Sourced from South China Morning Post, China Daily, Financial Times; additional content by WARC staff