Bike-shar­ing firms hit a dead end in Sin­ga­pore as Mo­bike ex­its scene

Singapore Business Review - - CONTENTS -

The fal­ter­ing bike-shar­ing in­dus­try in Sin­ga­pore was dealt an­other heavy blow when Mo­bike ap­plied to sur­ren­der its li­cence to the Land Trans­port Au­thor­ity (LTA), rais­ing ques­tions about the sus­tain­abil­ity of the busi­ness model in a city where last-mile trans­port is­sues re­main un­re­solved.

With around 25,000 bikes in its fleet, the Chi­nese bike-shar­ing uni­corn holds the ti­tle as Sin­ga­pore’s largest bike-shar­ing player with op­er­a­tions in 180 cities world­wide in­clud­ing Italy, Bri­tain, US and South Korea. Mo­bike has over 7.1 mil­lion ac­tive bikes and over 48.1 mil­lion ac­tive bike users as of April 2018, ac­cord­ing to a prospec­tus from its par­ent com­pany Meituan Dian­ping. The Chi­nese movie-tick­et­ing com­pany ac­quired Mo­bike for a re­ported US$2.7B in April 2018.

How­ever, fi­nan­cial dif­fi­cul­ties in its home mar­ket may have prompted Mo­bike to re­think its global am­bi­tions, said Yun­ming Wang, venture part­ner at Quest Ven­tures. An ear­lier re­port from Techcrunch re­vealed that Mo­bike re­port­edly laid off its en­tire Asia-pa­cific op­er­a­tions team as part of its efforts to trim down its re­gional pres­ence and fo­cus on its Chi­nese op­er­a­tions.

Losses from Ten­cent-backed Meituan

Dian­ping widened to $687.22m (CNY3.4B) in the quar­ter ended De­cem­ber 31 from $444.67m (CNY2.2B) the pre­vi­ous year as rev­enue failed to keep up with steep costs, ac­cord­ing to its fi­nan­cial state­ment.

“I would say the poor unit eco­nom­ics, com­bined with high burn and tricky cash-flow is­sues, plus an uncer­tain, of­ten op­pres­sive, reg­u­la­tory en­vi­ron­ment made the model un­ten­able in Sin­ga­pore. If Mo­bike in­tends to ex­pand across South­east Asia, I ex­pect it will do so in more reg­u­la­tory-lax do­mains, at the very least,” Justin Hall, part­ner at Golden Gate Ven­tures said. “When you be­gin to chase the dragon of in­creas­ing val­u­a­tions, high­spend/high-burn fi­nan­cial mod­els, and un­re­al­is­tic en­gage­ment num­bers, I think you ul­ti­mately have a recipe for dis­as­ter.”

Mo­bike’s woes are the lat­est in a string of dif­fi­cul­ties faced by Chi­nese bike-shar­ing play­ers in Sin­ga­pore. The firm’s planned with­drawal fol­lows the re­treat of Alibababac­ked ofo whose li­cence was sus­pended in Fe­bru­ary 2019 after fail­ing to com­ply with reg­u­la­tory norms, as well as obike’s sud­den exit in 2018 which is cur­rently in liq­ui­da­tion to re­fund credit to its users.

“The Sin­ga­pore bike-shar­ing scene is now dead. Where there was un­tidi­ness on the streets, there was how­ever last­mile con­ve­nience. With the in­dus­try all but dead, the streets are now tidy but the con­ve­nience is gone,” said Wang, re­fer­ring to the in­dis­crim­i­nate park­ing of shared bikes in Sin­ga­pore which could be traced as the source of ofo’s woes. The LTA ear­lier cracked down on hap­haz­ard bike park­ing by set­ting a QR code-based ge­ofenc­ing-so­lu­tion where users can only park their bikes at a des­ig­nated area by scan­ning a park­ing QR code.

“For an in­dus­try that was widely hailed as one of modern China’s four great in­ven­tions - the oth­ers be­ing high-speed rail, Ali­pay and e-com­merce - this is a sad re­treat and has im­por­tant lessons for star­tups to learn,” he added.

The as­set-heavy na­ture of the bike­shar­ing busi­ness may have also con­trib­uted to the sys­tem’s op­er­a­tional prob­lems as a grow­ing user­base means that play­ers re­quire a larger num­ber of bikes to ser­vice them, ac­cord­ing to Ramesh Ragha­van, vicechair­man at Busi­ness An­gel Net­work of South­east Asia (BANSEA).

“The busi­ness model was based not on bike eco­nom­ics but prob­a­bly more on de­posit col­lec­tion and us­ing the in­ter­est to gen­er­ate re­turn and grow cus­tomer base at the fastest pace. At some point of time, they all thought they would be­come a bank as in­ter­est on de­posit col­lected was size­able but net us­age of as­sets was very low,” he ex­plained.

To en­sure sus­tain­abil­ity against steep op­er­at­ing costs, Ragha­van pro­posed con­sol­i­da­tion and part­ner­ship given the busi­ness model’s high capex, which he claims does not make sense with low mar­gin and low as­set util­i­sa­tion. For in­stance, the re­main­ing play­ers could take a leaf out of the car-shar­ing in­dus­try and share bikes across dif­fer­ent op­er­a­tors through a com­mon app and ra­tio­nalise routes. “Bike shar­ing is less of a vi­able model in Sin­ga­pore and more sen­si­ble in larger cities in China if you can re­duce capex and in­crease rides per day. This also needs lot of work on find­ing the routes with max­i­mum

“When you be­gin to chase the dragon of in­creas­ing val­u­a­tions, I think you ul­ti­mately have a recipe for dis­as­ter.”

us­age and lim­it­ing to that. It can’t be based on buy­ing bikes for ev­ery new cus­tomer try­ing to use the app,” he said.

In­stead of seek­ing easy exit routes,

Hall urged bike-shar­ing plat­forms to tie up with pri­vate and pub­lic plat­forms in or­der to cush­ion the as­so­ci­ated costs of main­tain­ing and mov­ing the busi­ness for­ward. “[Star­tups should] op­ti­mise for pos­i­tive unit-eco­nom­ics, push heav­ily into part­ner­ships, both pri­vate and pub­lic, that could off­set some of the costs as­so­ci­ated with the busi­ness and per­haps, just maybe, fo­cus on build­ing a sus­tain­able busi­ness in­stead of a fast-grow­ing startup that might sell for a bil­lion dol­lars,” he said.

Where oth­ers see only chal­lenges, how­ever, some see op­por­tu­nity like Any­wheel, one of the few re­main­ing play­ers in Sin­ga­pore’s fal­ter­ing bike-shar­ing in­dus­try. Any­wheel plans to up­grade its li­cence to a full one dur­ing the sec­ond ap­pli­ca­tion of li­cenc­ing and ex­pand its fleet size from the ap­proved 1,000 bikes in line with its even­tual goal of is­land­wide roll-out. The home­grown startup cur­rently holds a sand­box li­cence as it has only been op­er­a­tional for more than six months when li­cenc­ing ap­pli­ca­tions opened in June 2018.

“In a way, the exit of other op­er­a­tors do give us more op­por­tu­nity. After all, the de­mand is there and less com­pe­ti­tion means big­ger mar­ket share right?,” Htay Aung, founder at Any­wheel told Sin­ga­pore Busi­ness Re­view.

When ofo’s li­cense was sus­pended in Fe­bru­ary, Aung ob­served a slew of re­quests for Any­wheel to de­ploy at the re­treat­ing firm’s ar­eas. “From the area that we de­ployed, the pick up rate has been higher than ever which gave us [the] con­fi­dence to go ahead. All these data, email and in­crease in pickup rate in­di­cated there is a heavy de­mand in Sin­ga­pore for shar­ing de­vices.”

Sim­i­larly, Sg­bike, which has over 3,000 bikes in its fleet, still be­lieves that the wheels haven’t fully come off of the bike­shar­ing in­dus­try. After adding 200 bi­cy­cles to its fleet in 2017, Sg­bike is rac­ing ahead to ex­pand to more ar­eas in the city.

“Over­all, I think dif­fer­ent firms and com­pa­nies have dif­fer­ent fo­cuses for dif­fer­ent mar­kets, and for Sg­bike as a lo­cal Sin­ga­pore brand by Sin­ga­pore­ans, Sin­ga­pore will still con­tinue to be our pri­mary mar­ket and has been so since our launch in Au­gust 2017,” said Benjamin Goh, mar­ket­ing di­rec­tor at Sg­bike. San­dra Sendin­gan

With around 25,000 bikes in its fleet, Mo­bike holds the ti­tle as Sin­ga­pore’s largest bike-shar­ing player

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