Still 'a lot of space' for competition in China's bike-sharing frenzy, says start-up exec

Key Points
  • China’s bike-sharing craze has left plenty of room for start-ups to compete, according to a senior executive at Hellobike.
  • The Shanghai-based bike-sharing company is building up its presence in China’s smaller cities instead of competing with Ofo and Mobike in the bigger, top-tier cities.
Hellobike is building presence in China's smaller cities

There's still a lot of room for competition among China's bike-sharing start-ups, according to a senior executive at Hellobike, a Chinese firm that lets users find and rent bicycles through its smartphone app.

The Shanghai-based company is one of the major start-ups competing in China's growing bike-rental space and is a key rival to industry leaders Mobike and Ofo.

"We are talking about high-frequency and very, very strong demand," Fischer Chen, chief financial officer at Hellobike told CNBC at the Morgan Stanley Technology, Media and Telecom Conference in Beijing. "With only two players in China, we still see a lot of space for us to provide better services and be more efficient in the industry."

The industry saw its first consolidation last year when Hellobike merged with Youon Ditan, an affiliate of Changzhou Youon Public Bicycle System.

The bike-sharing hype has also caught the attention of investors, who have poured millions of dollars in capital into the major start-ups.

Earlier this year, Ofo raised $866 million in a funding round led by tech giant Alibaba. Its competitor Mobike was acquired by China's largest provider of on-demand online services, Meituan Dianping, for reportedly $2.7 billion. Meanwhile, Hellobike raised $321 million in June from Alibaba affiliate Ant Financial.

Bicycles from Chinese bike-sharing companies like Ofo, Mobike and Hellobike
Julien Viry | iStock Editorial | Getty Images

While Ofo and Mobike have a heavy presence in China's top cities, Hellobike is trying to take market share in the country's smaller, more rural cities. The start-up says it is present in 300 Chinese cities and claims that users take around 20 million rides on their bicycles daily.

He explained the decision to move into the smaller cities was motivated by the fact that Hellobike was a lot smaller than its rivals. "It's actually less competitive to do business in the lower-tier cities, when Ofo and Mobike were pretty much concentrating in the tier-one cities," he added.

As the other two companies make their push into China's lower-tier cities, Chen said that Hellobike has "huge advantages" in areas of daily operations, maintenance and capital deployment efficiency. The company also does not charge users a deposit to use its bike-sharing service which, Chen explained, was "one of the key things" people think about before deciding on whether to hire a bike.

To be sure, despite the lucrative nature of the industry, both Ofo and Mobike have struggled in recent months as a result of vandalism, theft and poor maintenance of the bicycles. The Financial Times reported that Ofo has been burning about $25 million a month, while Mobike loses about $50 million monthly. Ride-hailing platform Didi Chuxing is reportedly in talks to buy Ofo, according to the FT.

Chen declined to comment on any potential merger between Ofo and Hellobike, which are both backed by Alibaba.

"Anything is a possibility but, basically, we're competing with Ofo the way we are competing with Mobike. Simply because we have overlapping masters doesn't mean that we don't compete," he said.

— Reuters contributed to this report.