Next step in building online transport ecosystem: analysts
Chinese car-hailing service provider Didi Chuxing announced on Monday that it will invest "tens of millions of dollars" in a domestic bicycle-sharing platform, a move industry experts said will allow it to explore new territory in the "sharing economy."
Under a partnership with Beijing-based start-up ofo, Didi will tap into the urban ride-sharing sector, including offering a bike-sharing service on Didi's platform, Didi said in an announcement sent to the Global Times on Monday.
The bicycle-sharing platform was established at Peking University by a group of students in 2014, and it now has daily usage of 70,000 bikes and more than 1.5 million riders, the announcement said. These numbers make the company the fastest-growing company in the sector in China.
"Didi is using the money to save time," Liu Dingding, a Beijing-based independent industry analyst, told the Global Times on Monday.
He noted that as the company aims at building a broad Internet-based transportation ecosystem that is part of the sharing economy, establishing a bike-sharing platform is the next step and finding a partner will help Didi reach its goal faster.
Exploring the bicycle-sharing sector is one of the company's strategic steps after acquiring its major competitor Uber Technologies Inc's business in China in August. Also, the reason why it entered into this new domain is that the growth in the online car-hailing sector is "limited," and it has to look for new potential customers - those who don't use any car-hailing service, Zhang Xu, an analyst at Beijing-based consultancy Analysys International, told the Global Times on Monday.
Many such people "are students in universities," he said, noting that it is a potential market.
The total number of university graduates will reach 7.65 million in 2016, according to a chinanews.com report in February, which cited the Ministry of Human Resources and Social Security. That number accounts for roughly 6 percent of the total population.
Starting from Peking University, ofo has expanded to more than 20 cities, and it got a pre-A round of financing of 9 million yuan ($1.3 million) secured by venture capital firms such as Will Hunting Capital, according to a post on its website in January. One month later, the company got an A-round financing, then an A plus-round, worth in total 25 million yuan.
Users could book yellow bicycles via the app of ofo, and pay by a choice of time and distance. For example one minute might cost 0.01 yuan, according to the official Weibo account of ofo.
It recorded total orders of 9 million from September 2015 to September 2016 and served more than 3 million university students, according to a post published by tech-focused platform 36kr.com on September 2.
About 640 bike-sharing systems with more than 640,000 bikes were already in operation around the world in 2013, and the market will grow by 20 percent every year until 2020, strategy consultancy Roland Berger said in a report published in April 2015. By then, the market will be worth more than $4 billion.
Targeting this fast-growing industry, ofo has also been facing competition from its major rival mobike, another bicycle-sharing platform led by a former senior executive from Uber China, Wang Xiaofeng.
The similarities in business models that Didi and ofo share could be the reason why Didi chose the competitor of mobike, Liu, the analyst, said.
"Ofo adopts the consumer-to-consumer model, more like what Didi is doing," he said. Bicycles rented through its platforms are mainly provided by students, a process that is similar to Didi's business model, which brings taxi drivers from different companies to one platform.
However, the operating costs for mobike are relatively high, as it has to spend an average of 3,000 yuan per bike in the manufacturing process, which is much higher than that of ofo, where the cost per bike is estimated at 200 yuan, domestic news website jiemian.com reported on Wednesday.
Mobike said it won't comment on Didi's latest investment in its rival when it was reached by the Global Times on Monday.
It is still hard to say who will win over the market, noted Zhang, the analyst. But Didi surely made the decision after having considered the profitability that the new investment could generate.
