Shanghai-based Phoenix, a bicycle producer that's been around for 120 years, will provide about 5 million bikes for ofo over the next 12 months, one of the country's top bike-sharing companies, Phoenix announced on Friday.
The purchase order may bring a profit of about 40 million yuan ($5.79 million) for Phoenix, which saw domestic sales decline with merely 52.89 million yuan net profit last year. The profit for each bike will be about eight yuan.
Details such as technology requirements and pricing were not specified in the Strategic Cooperation Agreement, according to the announcement.
In addition to manufacturing, the strategic cooperation also covers areas including branding and the development of new models to meet shared bike quality standards in different countries. Every bike produced by Phoenix, compared with other ofo bikes, will have the classic Phoenix logo.
While targeting major Chinese cities including Beijing and Shanghai, the two parties will also explore opportunities in overseas markets. As the largest original bike exporter in China, with registered trademarks in more than 80 countries and regions, Phoenix will also use its overseas distribution and logistics network to support ofo's international expansion, according to the announcement.
The two companies started business cooperation about six months ago, mainly in bike manufacturing.
Ofo said it operates in 100 cities in four countries — China, the US, the UK and Singapore, with nearly 5 million bikes and 100 million users. So far the number of average daily orders from overseas markets reaches about 20,000, the company told Shanghai Daily. Ofo hopes to ship about 50,000 bikes to about 10 US cities by July this year, according to a Xinhua report.
In the past couple of years, 29 bike-sharing brands have sprung up, crowding the streets of China with more than 3 million bicycles, all wrestling for domestic market share. Demand in China is estimated at around 20 million bikes, according to Liu Xuequan, who heads the association of the bike industry in Tianjin, the country's largest bicycle manufacturing base.
Thanks to the booming bike-sharing industry, China's bicycle manufacturers are poised for resurgence.
A report from Beijing-based Big Data Research showed the number of shared bicycle users exceeded 18 million at the end of 2016 and is expected to approach 50 million by the end of this year.
