China’s bike-sharing titans roll into Startup Nation

The most disruptive technology in transportation this past year wasn’t an electric-powered vehicle or a self-driving car, but a human-powered, pedal-driven, single-track, two-wheeled bicycle.

In less than 18 months, two Chinese dock-less bike-sharing companies, Mobike and ofo, have become the fastest startups to produce valuations of $3 billion each, according to CB Insights.

Now, these companies are making their way to Israel and experts say that existing stationed bike platforms like Tel Aviv’s Tel-O-Fun may be on their last legs.

Station-less or dock-less bike-sharing platforms allow riders to pick up and return bikes virtually anywhere, instead of at designated dock locations. Using an app, riders can find the bike closest to them, unlock it using a scan code, and once they are finished riding leave it at any public place as long as it doesn’t block traffic or pedestrian walkways.

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“Many people don’t realize that there is a bike-sharing revolution underway,” said Imri Galai, general manager of ofo’s Israel operations, in an interview. Galai, who formerly worked with sharing economy industry giants Airbnb and Gett, says that station-less bikes are the “next frontier” in the sharing economy.

Last October, ofo launched 200 bikes Bar-Ilan University campus in Ramat Gan and plans to deploy at least 1,000 in Israel within the first half of 2018.  Shortly after, ofo’s fierce competitor Mobike declared in January that it would partner with Israeli car sharing company Car2Go Ltd. to launch its service in Tel Aviv in the first quarter of 2018. The service launched this week.

The number of bikes used by municipal bike-sharing systems increased more than 55 percent worldwide in 2016 compared with 2015, according to data collected by the Bike-Sharing blog, a website that manages and tracks global data about bike-sharing schemes.

Dock-less bike apps are becoming a popular alternative to the existing stationed bike platforms in many cities because they solve the “last mile” problem in the transportation industry, say experts.

“The last mile” is the distance that users of public transit need to walk to get to or from their trains and bus stations.

“Nobody thought that station-less bikes were going to be able to solve this problem when they were first launched, but they are quickly becoming a part of transportation landscape,” said Lihong Zhang, senior lecturer at the Liverpool Business School of Liverpool John Moores University, who researches public bike-sharing and other mega-transportation systems and designs.

This boom has led companies like ofo to spend millions of dollars in R&D to customize bikes based on demographics, weather conditions, terrain, and even the physical size of users, says Galai.

Compared with the existing Tel-O-Fun bikes, Ofo’s bike is lighter, has three gears, and is designed for the rough streets of Tel Aviv. The bike’s wheels are made of solid rubber, eliminating the risk of flat tires — another common problem for bikers Galai said.

Aside from the benefits reaped by users of dock-less bike apps, municipalities have a lot to gain, say experts.

Cities spend millions implementing a traditional docked bike-sharing system. The average capital expense of installing one bike ranges from $3,000 to $5,000, depending on the city, according to a study by Pew research. Based on these estimates Tel Aviv could have spent between $6 million to $10 million installing the infrastructure and docking stations.

In addition, there are other long-term costs such as adding docking stations and re-balancing or placing the bikes back at their original locations after they are used.

“Just re-balancing the docked bikes to different stations alone requires people working three shifts 24 hours a day. Bike apps like ofo are a zero-cost solution for cities and municipalities, with no installation costs for docking stations or long-term maintenance expenses,” Galai said.

In the past three years, Tel-o-Fun reportedly has had problems maintaining profitability due to technological glitches and overwhelming costs of maintaining and servicing bikes, an issue which is not unique to Tel Aviv. Recently Seattle, overburdened by the costs required to maintain its existing docked bike platform, replaced its aging bike-sharing system with station-less bikes.

Funding for these programs usually comes out of the city’s budget, with taxpayers ultimately carrying the burden of the shortfall in profits.

Tel Aviv’s existing docked bike-sharing platform, which consists of 2,000-plus aluminum bikes and 211 docking stations, has seen a steady decline in the number of users from 9,000 riders per day to 4,000, according to data from FSM Ground Services Ltd. (FSM), the company that services the system.

FSM said in a statement that the decline has been primarily due to the introduction of the electric bike, along with other issues.

Compared to the Tel-O-Fun, which charges a  minimum access fee of NIS 17 ($4.9) and additional NIS 6 for one hour of use, ofo does not charge an access fee and costs an average of NIS 3 for 30 minutes of use.

FSM said it has a ten-year contract with the municipality and does not plan to make any changes to its fees or program in response to the entry of dock-less bike sharing companies at this time.

“Israelis are very selective, and if there is a superior product, they will use it. When there is a better way to travel they will adapt to it,” said Erel  Avineri,  associate professor at AFEKA, Tel-Aviv Academic College of Engineering, who leads the college’s Center for Infrastructure, Transportation, and Logistics.

The success of the government bike-sharing system in Tel Aviv stemmed from the increasing difficulty of driving in traffic-choked Tel Aviv, and the moderate climate and short distances make biking an attractive alternative, said Avineri.

Bike-sharing platforms can reduce congestion in large cities and offer rich data to city planners to better design the use of public spaces, according to a Washington DC-based study on bike-sharing.

But experts say that these companies come with their share of challenges, such as overcrowding and illegal parking, and municipalities must plan well for these changes.

In recent months, the large number of cycles on Chinese streets has led to clogged sidewalks where pedestrians couldn’t walk and pile-ups of illegally parked bikes.

“There is a lot that Israel and the world can learn from China’s mistakes. One important message to pass to the public is the need for an independent report about their business model and whether it is sound and sustainable. The massive rushes into this giant project in China caused lots of social and legal problems that Western society can and should avoid,” Zhang said.

But ofo is proactively taking steps to prevent these issues, said Galai.

“Ofo works very closely with the municipality to come to an agreement before launching a service in each city and educates users how to best use the shared bike system, including parking legally and reporting broken bikes,” said Galai.

“Although ofo does not use docking stations, to prevent riders from improperly parking bikes, ofo has started to mark locations to show users the appropriate place to park bikes,” Galai said.

No comment was immediately forthcoming from the Tel Aviv municipality.

Ofo’s Tel Aviv offices are at Techcode, a China- Israel innovation center, where The Times of Israel also has office space.