China’s colorful bike wars heat up with more wheels on the road

Bike-sharing heats up in China
Bike-sharing heats up in China

Strolling through Beijing these days means seeing piles of bikes from Chinese start-ups aiming to improve urban mobility and promote greener transport.

The top two firms, Mobike and Ofo, have picked orange and yellow for their respective wheels, making the China bike wars an exceptionally colorful one. Money from big investors have pushed company valuations to $1 billion each. But it remains unclear how either expects to make money off cheap bike rides costing a couple of cents.

"Our financial situation is in a very strong position, and we are not in a rush to think about turning a profit," Mobike CEO Davis Wang told CNBC. Investors "recognize that what Mobike is doing can help improve society," he added.

It's a simple concept: use an app to unlock a nearby bike and ride to your final destination for a small fee. And it has taken off in Chinese cities, where getting around can be a pain with terrible traffic and long city blocks.

Mobike bicycles are seen in line at a docking area along a pedestrian sidewalk at the Central Business District (CBD) in Beijing, March 27, 2017.
Barry Huang | CNBC

But competition is fierce, and both Mobike and Ofo are offering incentives to attract more users — even allowing people to hop on for free. The bikes are also easily susceptible to theft and vandalism, and coming industry regulations could eat further into margins.

Wang welcomed increased oversight, and urged government officials to mandate bikes with smart locks and GPS "so that city officials can better understand how they are used in each urban center, and to ensure that these bikes … are put to good use."

Those features are ones that Mobike has long bragged it will ride to victory — for example, users scan a QR code to unlock the bikes. The company designed and manufactured its own bikes, complete with solar panels and rust-resistant materials, using proprietary parts that require special tools. That means thieves trying to snag a couple of bike parts will discover the stolen bits aren't useful at all because they won't fit into standard bikes.

Mobike's wheels could get even more unique soon — manufacturer Foxconn has invested in the firm and will begin making smart bikes in the partnership.

China goes bike to the future
China goes bike to the future

The bikes are solving some urban challenges, making it easier for pedestrians to get around, and even reducing transport pollution. Mobike says its bikes have helped to cut nearly 200,000 tons of carbon emissions.

But in an ironic twist, the two-wheelers are now starting to create their own traffic jams, with unused or broken bikes stacked high on sidewalks and street corners. Still, they're convenient because, unlike other bike-share programs, riders can grab them and drop the bikes off anywhere in the city — not just at designated docking stations.

In the long run, the firms are collecting plenty of data on China's young consumers — where they go, when they travel — and that could be worth a lot to companies looking to market to that crowd.

As the stakes rise, both companies are trying to court more backers — Apple's Tim Cook even stopped by Ofo's Beijing offices about a week ago. But Mobike seems unruffled about the visit, and its rival.

"No, I'm don't feel worried," Wang said.

Ofo couldn't immediately be reached for comment for this story.

—Barry Huang contributed to this report.