Deposits lost in spate of Chinese bike-share failures

The streets of Chinese cities have been taken over by fleets of colourful shared bikes that users can hire for less than a dollar a month after paying a deposit. However, some cash-strapped bike start-ups have used this cash to fund operations — against Beijing’s wishes — and hundreds of thousands of consumers have complained after bankrupt groups failed to return the cash.The mass complaints have exposed an easily exploited loophole in China’s growing bike-rental market, one that is being tested in a civil suit filed this week against Mingbike, a Guangzhou-based bike sharer, the first court case of its kind. “Most companies refrain from using deposits to pay for expansion, but we see it in the shared bike space because there is a liquidity and fundraising issue,” said Xue Yu, analyst at IDC, a market research firm. In May, top policymakers, including those from China’s transport ministry and central bank, jointly issued draft regulations that asked companies to distinguish cash flows from deposits and store them in a designated bank account. The express purpose was to ensure users could reclaim the cash if the company failed.

Mobike pile

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The Guangdong Consumer Council, a provincial consumer watchdog, filed the Mingbike suit after it received 30,000 complaints from users unable to reclaim a $30 deposit after the group shut down last month. RecommendedChina’s booming bike-sharing sector beset by theftChina’s bike-sharing boom in chartsChina’s bike-sharing bubble bursts as Bluegogo failsOfo and Mobike, China’s two largest bike sharing groups by market share, said they do not use consumer deposits to fund daily operations. The groups have together attracted about $2bn in funding this year alone. Smaller start-ups, such as Mingbike and Kuqi, have struggled to raise the capital to buy and maintain bikes, especially as competition heats up in the over-saturated bike sharing space in China. Consumers have forked out almost Rmb1bn ($150m) in deposits for shared bikes to groups that have since gone bust, according to a report from Ant Financial, the fintech affiliate of Alibaba, the tech company. The figure may underestimate consumers’ exposure. The China Consumers Association, a state-run advocacy, issued a public letter in December demanding Kuqi return deposits of about $45 to each of its 16m registered users — if all users were unpaid that would add up to $720m.

Why we can’t have nice things: dockless bikes and the tragedy of the commons

If there is one sad fact that technology has taught us, it’s maybe that we just can’t have nice things. Now Washington DC has become the latest testing ground for what happens when technology and good intentions meet the real world.
Brightly coloured bikes began popping up around the US capital in September like little adverts for a better world. On a recent trip two lemon yellow bikes were propped up in the autumn sun by the carousel on the Mall. A pair of lime green bikes added a splash of colour to a grey corner of DuPont Circle. An orange and silver bike waited excitedly for its rider outside the George Washington University Hospital.
The untethered bikes all belong to a new generation of “dockless” bike share companies. To pick one up users download an app that shows where the bikes have been left. Scan a QR code on your phone, the bike unlocks and you are off for a $1 30-minute carbon-free ride. Unlike docking rental services, which require bikes to be returned to a fixed docking station, you can leave your ride wherever your journey ends, practically. And therein lies the problem.

Behind this bucolic scene is a multibillion-dollar cutthroat battle that is pitching two of China’s most successful tech companies against Silicon Valley-backed rivals and a system that has proved, shall we say, problematic, in other cities.
DC’s dockless bike experiment is a beta test designed to run through April next year. It seems to be working beautifully. The city already has close to 4,000 docked bikes serving two million-plus riders a year with its Capital Bikeshare system. So far the companies offering dockless bikes – China’s Mobike and Ofo and the US-backed LimeBike, Spin and Jump – have only been allowed to put up to 400 bikes each on the streets. That’s six bike companies for a city of just over 680,000 people – not all of them bike riders.
At current levels the bikes are fairly inconspicuous but all the companies are keen to expand. LimeBike’s founder Toby Sun has said he’d like to see 20,000 dockless bikes in the city.
Sadly in other cities this green – and taxpayer-free – solution to urban transport issues has turned into a surreal nightmare.
In China, where there are some 16 million shared bikes on the street and MoBike alone now has over a million, the authorities have been forced to clear up ziggurats of discarded bikes. Residents of Hangzhou became so irritated by bikes lazily dumped by riders, and reportedly sabotaged by angry cab drivers, that the authorities were forced to round up 23,000 bikes and dump them in 16 corrals around the city.
“There’s no sense of decency any more,” one Beijing resident recently told the New York Times after finding a bike ditched in a bush outside his home. “We treat each other like enemies.”

In the UK bikes have been hacked, vandalized and thrown on railway tracks. In Australia dumped bikes have been mangled into pavement blocking sculptures – perhaps in a homage to technology’s promise of “creative destruction”.
Utteeyo Dasgupta, assistant economics professor at Wagner College in New York, said the bike dilemma had some similarities to the “tragedy of the commons” – the economic theory that individuals using a shared resource often act according to their own interests and to the detriment of the shared resource.
There are two distinct “abusers” in the case of dockless bikes – riders and vandals. In the case of riders, problems are likely to be exacerbated by competing bike companies flooding the market with bikes in order to win market share. “The tipping point is likely to come when there are so many bikes that each user stops internalizing the cost of not getting a bike,” he said. With bikes literally littering the street, riders become less mindful of how they treat the bikes and where they leave them when there is always another to pick up.
The second group of abusers, vandals, are a different matter and one better dealt with by law and order than apps or economics. But again, said Dasguppta, supply and demand rules apply. The more bikes there are, the more opportunities for vandals.
As dockless bikes spread across the US no one is more determined to make sure decorum is maintained in DC than the companies spreading them. “Biggest concern I hear is what is parking going to look like,” says LimeBike’s Maggie Gendron, director of strategic development and a former legislative assistant to Vermont’s Senator Patrick Leahy. Officials “might not necessarily want bikes all over the street”, she says.

But cities too “are at a tipping point”, she says. They do not want more cars downtown and they are looking for responsible transportation solutions that can ease congestion. Dockless bikes offer a solution at no cost to the city, freeing money for other investments.
The companies are hoping technology can head off the excesses other cities have witnessed. Bikes can’t be locked in bad parking spots – outside city monuments and in security zones for example. MoBike and others punish poor parkers by increasing what they pay for rides and then knocking them off the system if they offend too often. But there is little to stop vandals and thieves doing what they will with the vulnerable two-wheeled steeds except for common decency. A virtue no tech company seems to have developed an app for yet.
And the battle for supremacy means inevitably that more bikes will soon end DC’s dockless bike paradise. MoBike and Ofo have raised more than $1bn each from investors this year alone. LimeBike, started in January, has already raised $62m from investors including Andressen Horowitz, which counts Skype, Twitter and Instagram among its others among its former proteges. Bike wars are here.
Outside the White House Wijnand Vanderwerf has seen the dark side of bikes firsthand. Watching a protest (unrelated) and sitting astride a MoBike he said he liked the service in DC but that it would never work in his native Holland. He already has three bikes (one for the city, one for longer rides and a spare for guests) and so do most of his friends. “There’d be nowhere to park them,” he says.



Paris wants to regulate Asian bike-share operators

PARIS (Reuters) – Paris does not want Asian bike-sharing operators to burst into the city the way Airbnb and Uber did and plans to introduce regulation to ensure an orderly rollout of new bicycle schemes, a top city official told Reuters.

Launched just last week, Hong Kong’s has already spread its bikes all over Paris and Chinese giants Ofo and Mobike, as well as Singapore startup oBike, see entering the French capital as a key step in their plans to conquer Europe’s city centers.

Armed with hundreds of millions of dollars of venture capital, the Asian bike-sharing firms, which have revolutionized urban transport in China, have already launched their colorful dockless bikes in a string of European cities like Milan and London, some with local authority blessing, some not.

Some cities fear that the uncontrolled introduction of thousands of bicycles will bring chaos on roads and sidewalks, as has happened in China. Dockless bikes can be found and unlocked with mobile apps and parked anywhere.

Paris deputy mayor for urban planning Jean-Louis Missika, told Reuters the city wants to control the bike schemes and does not want to see them to break into an unregulated Paris market the way U.S. ride-hailing firm Uber and short-term rental firm Airbnb have in recent years.

“We will ask the government to give the city the power to regulate under the form of a license” Missika said on the sidelines of urban mobility conference Autonomy.

He added that bike share operators will have to respect rules about using public space and may have to pay a license.

“We do not have the required regulatory framework, just like it was with Airbnb … and Uber before legislators created a license,” Missika said.

In July, Paris made it mandatory for apartments rented through Airbnb to be registered.

Missika said Paris is in favor of bike-sharing, which it has pioneered with its dock-based Velib scheme, but added he was not too happy with the way had started operations.


“They saw a gap in the regulation and they jumped in. We cannot blame them, but that does not mean we will leave it at that” he said.

Ofo – which operates 10 million bikes in China and has launched thousands in Milan, Vienna, Valencia and London – told Reuters last week it plans to launch its bikes in Paris around year-end.

Missika said several operators have contacted the city to discuss introducing their bike schemes, including Ofo’s big Chinese competitor Mobike.

Singapore startup oBike, which has launched its bikes in London, Munich, Madrid and Zurich, already has a team in Paris.

“We hope to get bikes on the ground in Paris in the next few weeks” oBike’s Amber Huang told Reuters. The company has also started talks with several other French cities including Avignon, Marseilles and Strasbourg.

Last month, Brussels mobility minister Pascal Smet said oBike had launched there without contacting regional authorities and said he was looking into establishing a legal framework.

” ‘d be happy to work with local authorities” Huang said.

Florian Bohnert, head of global partnerships at Shanghai-based Mobike, declined to comment on the firm’S plans for Paris and Europe but said the firm always negotiates with local governments before launch.

“Some other players tend to act first and talk later, put 500 bikes in a city, have a press announcement, then a few months later their bikes are being impounded” he said.

Mobike operates 7 million bikes worldwide, mostly in China. In May, it raised $600 million from China’S  Internet giant Tencent Holdings and several private equity firms, which will be partly used for foreign expansion.

In recent months it has launched thousands of bikes in Kuala Lumpur, Bangkok, Japan’s Sapporo and Fukuoka, in Washington DC and in Europe it has launched in London, Manchester and Newcastle, in Milan and Florence.