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CCTV Script 16/08/17

— This is the script of CNBC's news report for China's CCTV on August 16, Wednesday.

Although bicycle-sharing and car-sharing are part of the transport-sharing economy, there are fundamental differences between these two. Firstly, from the company's assets point of view, DiDi Chu Xing and Uber are using idle community assets. In fact, Uber and Didi Chu Xing do not own car assets and therefore can be considered as being asset-light. On the other hand, bicycle-sharing companies, such as China's two giants OFO and MoBike, have to manufacture their bicycles and therefore their sharing model would be asset-heavy. Incidents like bicycle theft or any damage made to the bicycle would incur a higher cost of the companies. Secondly, both companies have different target audiences. Car-sharing is aimed at transporting their passengers from point-to-point while bicycle-sharing addresses "the last mile" problem in one's journey. Effectively, this means standing in for the mileage that is not covered by subways and buses. In doing so, they are also solving the problem of traffic congestion in large cities.

Theoretically speaking, bicycle-sharing can solve the pains of commuting. Following the boom of bike-sharing companies in the Chinese market and their eventual expansion towards overseas markets, two major trends emerge in this period of time. Firstly, following the rise and flourishing of this industry, a pattern of bigger and higher capital intensity companies weeding out inefficient small-scale companies have emerged.

Just in China alone, there are at least 50 bike-sharing companies and they have put out over 20 million bicycles on the roads.

According to Big Data Research cited by Xinhua News Agency, in the first quarter of this year, OFO's market share stood at 51.9% while MoBike stood at 48%. Both of these giant bike-sharing companies have taken up more than 90% of the market share. Not only that, the latest round of financing for the two giants total up to USD 1.3 billion. At the same time, a number of bicycle-sharing companies, such as Wukong Bike and 3Vbike, have closed down due to fierce competition and how the problem of damage and theft of bicycles went beyond their expectations. Therefore, industry experts believe that after the intense competition, the industry will move in the direction of cooperation between the oligarchs.

The second trend is seeing bicycle-sharing companies expanding overseas. At the end of March this year, MoBike released its bicycles in Singapore. Furthermore, MoBike also has plans to place its bicycles in nearly 100 cities around the world by this year. On the other hand, OFO already has its presence in the United States, United Kingdom and Singapore and also has plans to spread its presence in major cities in the world. In addition, Bluegogo, has also arrived in the United States and the United Kingdom. At the same time, we are also seeing the rise of overseas local bike-sharing companies. However, something that cannot be ignored is the inability for bike-sharing companies to acclimatize to the local culture during the process of this overseas expansion, of which, one of the biggest challenge is local government regulations.

For example, when Bluegogo entered San Francisco, authorities raised many concerns and also felt that "public road rights" was a point of dispute. As a result, in March this year, the San Francisco municipal government passed a new bill to prohibit non-pile bicycles from operating without license. The authorities are now more stringent when it comes to license application, law enforcement fines, public parking of bicycles and other more controversial issues.

Despite these challenges, insiders still believe that the sharing of bicycles will bring about a reduction in unused assets and an overall increase in efficiency in the society. Furthermore, it is expected that bike-sharing companies will continue to push forward overseas expansion plans.

[CATHERINE WOOD, CEO, Ark Investment Management] "So I buy a car. What am I buying? It's a big ticket item. I'm prepaying for a lot of transportation. And yet I use it 4 percent of the day. So it's a stranded asset. What we're doing is freeing up assets. And allowing people to pay as you go instead of paying upfront. That's a financial inclusion."

At present, MoBike and OFO have rejected the possibility of merging and as for the rest of the market, a consolidation for the firms may happen. Recently, Reuters reported that OFO is negotiating a new round of financing, primarily led by Japanese company, Softbank, and it is expected to raise USD1 billion. This round of financing would also possibly be the China's bike-sharing industry largest round of financing. Therefore, from what we see, capital markets are still very willing to invest in the bike-sharing economy. Yet in the long run, the main concern, moving on from this current stage, would be whether bike-sharing companies can achieve profitability. This would also be a problem faced by giant bike-sharing companies.

CNBC's Qian Chen reporting from Singapore.

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