China’s ‘bike graveyards’ a testament to bubble trouble
There were 2.35 million bicycles on the streets or stacked up on pavements during the boom days
They are graveyards to a craze which spiraled out of control. On the outskirts of leading Chinese cities, rows of brightly-colored bicycles are packed in tight formation, a rusting monument to a two-year phenomenon.
At its height in 2017, the bike-sharing mania gripped major urban areas such as Beijing, Shanghai, Shenzhen and Tianjin, with the big three of Mobike, Ofo and Bluegogo expanding rapidly.
In the capital alone, there were 2.35 million cycles on the streets or stacked up on pavements just a year ago. But all that changed when the city government left the industry with a proverbial flat tire, scaling the number of bikes down to 1.9 million.
“Because of the urge to seize market share, many companies invested huge amounts of capital in the sector regardless of the actual demand, which led to excessive overcapacity and damaged bikes, forcing many of the companies to declare bankruptcy earlier this year,” Zhu Dajian, a professor at the College of Environmental Science and Engineering at Tongji University in Shanghai, said.
Technology played a key role in what was a simple idea. Customers scanned QR codes on their smartphones to register “deposits” before unlocking cycles and paying for short trips.
Mobike, Ofo and Bluegogo flourished before the wheels started falling off the business model. Fueled by venture capital money, Bluegogo was the first to crash at the end of last year.
“Its failure represents the funding bubble collapsing [for shared bikes],” Xue Yu, an analyst at market research firm IDC, told the Financial Times.
As the fad turned into a fiasco with parking chaos and traffic turmoil triggering safety concerns, Mobike and Ofo looked for overseas openings. But they never managed to get out of first gear.
Ofo reduced its presence in Germany, Australia, Israel, Austria, India, Malaysia and the Czech Republic earlier this year, as well as shrinking its operations in the United States and the United Kingdom.
Mobike has also suffered from the downturn and is looking to reevaluate its US strategy.
“Although the bike-sharing companies are responsible for recycling their unusable bicycles lying on streets and in ‘bike graveyards’ in many cities, most of them cannot do so because they don’t have enough money to even return the deposits of customers,” Zhu Wei, the deputy director of the Communication Law Center at the China University of Political Science and Law in Beijing, said.
“But it is unfair to spend taxpayers’ money to clean up the bike-sharing companies’ mess,” Zhu Wei added.
Many of the bike-sharing startups have since folded, leaving “graveyards” dotted around the fringes of Chinese cities.
Municipal governments are still dealing with the fallout, with many of the paint-peeled cycles being crushed into cubes and recycled as scrap.
Yet in the end, “the bill for cleaning up the mess left behind should not be footed by taxpayers,” Zhu Dajian, a professor at the College of Environmental Science and Engineering at Tongji University, pointed out.
At one point, there were about 60 bike-sharing companies with between 16 to 18 million cycles on China’s crowded streets. It looks like scrap merchants are going to be in for a busy time.