China’s cutthroat bike-sharing industry sees its first merger

Photo credit: walkingsky / 123RF.

More than a year after the inception of China’s bike rental craze, consolidation is finally coming. Yesterday, two Chinese bike-sharing startups announced their merger – the first in China to do so – signalling new competition to unicorns Mobike and Ofo, the two market leaders.

The two companies, a subsidiary of bike rental company Youon and Shanghai Jun Zheng Network Technology, will combine forces to form a new entity run by HelloBike – a bike rental service operated by the latter. Ant Financial, one of Youon’s investors, will also own a portion of the new company.

Both Youon and Hellobike have tackled bike rentals in China’s smaller cities outside of Shanghai, Beijing, and Shenzhen. Founded in 2016, Hellobike claims it has bikes in over 100 cities in China and more than 30 million registered users. Youon, which went public on the Shanghai Stock Exchange in August, boasts even wider coverage of the country. In addition to station-less bikes, Youon also operates government-funded bicycle rental stations in more than 220 cities in China.

In contrast, Mobike has made more strides internationally, with Manchester, UK as its 100th city in June. The bike rental startup has also expanded to Singapore, Japan, and the US.

Youon and Hellobike’s new entity will benefit from a strategic partnership with Ant Financial.

On top of combining bike resources, Youon and Hellobike’s new entity will benefit from a strategic partnership with Ant Financial. Alibaba’s financial affiliate already offers deposit-free bike rentals for several bike companies – including Youon – through Sesame Credit, the company’s proprietary credit system. Besides potentially adding Hellobike to its suite of bike sharing partners, it’s unclear what the scope of Ant Financial’s role will be.

According to Chinese media reports, Hellobike, Youon, and Ant Financial will partner together not only in renting bikes, but electric scooters and cars.

A spokesperson from Ant Financial declined to elaborate, only commenting that the company would support its partners and promote the development of green transportation and the sharing economy.

Rumors of Mobike and Ofo merging appeared earlier this month, though neither company has confirmed. If true, the combined valuation of both companies would probably exceed US$4 billion and end the costly competition between the two unicorns, according to sources at Bloomberg. That would put bike sharing right in line with China’s ride-hailing industry, which ended with Didi Chuxing’s acquisition of Uber’s China operations.