China’s bike-sharing battle looks a lot like its ride-hailing war

One of Ofo’s distinctive yellow bikes. Photo credit: Ofo’s Weibo.

Just as China’s multi-billion dollar ride-hailing war comes to a close, a new capital-hungry industry is taking off to replace it: bike sharing.

Today, Beijing-based bike sharing startup Ofo announced a US$130 million series C round – its fifth round of funding since the service went online 13 months ago. The latest round includes funding from ride-hailing titan Didi Chuxing – announced just two weeks ago – as well as fresh capital from a hodgepodge of investors, including Chinese unicorn Xiaomi, Shunwei Capital (a venture capital firm co-founded by Xiaomi’s founder Lei Jun), and Russian billionaire Yuri Milner.

Ofo is part of China’s burgeoning bike sharing industry, where users park their bikes wherever they want and use an app to find available bikes parked nearby. The startup’s services are targeted at university students, but that could change very soon.

“At the moment, we do have plans to expand into the city, though it has nothing to do with this latest round of funding,” a spokesperson from Ofo told Tech in Asia.

That would put it head-to-head with Mobike, which raised US$10 million in August. Mobike was founded by David Wang, a former executive of Uber China, the ex-arch nemesis of Didi, one of Ofo’s largest investors.

Invest first, make money later

Photo credit: Ofo.

China’s rapidly growing bike sharing business is awfully reminiscent of the country’s ride-hailing wars, which took off last year when two Chinese ride-hailing companies, Kuaidi Dache and Didi Chuxing (previously Didi Dache), tried to destroy each other through cash-burning subsidies. Once they merged, the turf war continued to rage on, but between Uber and Didi.

The Mobike versus Ofo battle could follow a similar trajectory. Like ride-hailing, bike sharing relies on investor money to attract users with rock bottom prices. For example, Mobike’s service costs US$0.15 per half hour, plus a US$44.76 deposit. In addition, unlike ride-hailing, the dockless bike sharing industry faces its own set of unique challenges, including vandalism and theft.

The latest round of funding will go towards growing Ofo’s team and improving its hardware. Ofo is teaming up with Xiaomi to upgrade its bikes and plans to incorporate its service into Didi’s ride-hailing app, according to the company’s press release.

Converted from Chinese yuan. Rate: US$1 = RMB 6.70.