The shared bike industry is an enormous black hole, drawing traditional bike makers in. However, it doesn’t guarantee anything for these traditional manufacturers’ future. No matter how this war of bikes, driven by the capital, will end, the stream of revenue will eventually come to an end for traditional bike makers.

Every 15 seconds a shared bike will enter the market.

Wangqingtuo town is considered as the ITxinwen/2017/0417/223437.html">Bike Town in China. This small town with only a population of over 30,000 accounted for 10% of the bike production in China in 2015. Low and mid-end bike production brings about very low profit. As the supply gradually surpassed the demand, it didn’t take more than a few years for the profit to drop from ￥20 per bike to ￥2 per bike in 2016.

In the beginning, these bike makers relied on export instead of today’s Internet+ wave. In 2016, around 53 million bikes (e-bikes not included) had been manufactured here in Wangqingtuo town, 72% of which were exported to overseas countries. As a matter of fact, over 70% of the bikes around the world were made in China.

However, since most of these exported bikes are from low or mid-end brands, and the fact that there is a lack of Chinese brands, Chinese bike manufacturing industry’s low price strategy is losing its edge. “Shared bike sounds like a business operation revolution. Its backbone is bikes, supported by the real economy,” Li Keqiang, prime minister of China once commented on the shared bike sector.

The Bike Town of China is resurrected by the shared bike wave

Subsequently, shared bike platforms, being the new data flow entries when new fields such as AI, VR/AR etc. are still maturing, enjoy the dividend presented by the demand.

Fushida, ofo’s current main supplier, once participated in a public bike project led by the government. It was a station shared bike project, through which users needed to have specific cards to borrow the bike. After use, users would need to return them to certain stations instead of parking them by the roadside like what we do with stationless shared bikes. Most of these bikes end up in a very bad shape, rusty, after hours of hours being splashed by the rain and wind.

To provide bikes for ofo, FushidaTianjin increased its production capacity from 10 million to 12 million in 2016. According to official statement, an ofo bike is being manufactured every 15 seconds and 1.5 million bikes per month. Another supplier, FlyingPigeon, opened three new production lines for ofo, running in full capacity to produce 400,000 ofo bikes monthly.

That’s how the capital driven craze of bike orders came. These bike makers have endless bike orders coming in. Their production capacity became the only bargaining chip they worry about. Manufacturers with more funds are now considering to introduce welding robots to their factories while small-scale manufacturers are hiring more temporary workers to boost their busy production lines.

Turning to ofo from Mobike, how far will low-quality OEM factories go?

Mobike’s investor Li Bin had the following suggestions for Mobike in the company’s early stage: the core of the bike sharing model is maintenance free; these shared bikes should be highly recognizable on the street; the biking experience matters. Therefore, when Mobike was designing their first bike, the company wanted a bike that could operate without maintenance for four years.

After talking to many suppliers, Mobike’s founder Hu Weiwei found that these bike makers didn’t really care for their ideas. They didn’t even give Hu a price offer because they believed Mobike’s requirements were too high for OEMs. For instance, Mobike wanted spokes that could last for four years. “Spokes are cheap. Why don’t you just change one if it’s broke,” this is the reply Hu got from the bike makers.

In contrast to that, ofo had a very different opening. In its early stage, ofo targeted in-campus short distance demand, and therefore ofo wanted to purchased massive fleets of bikes at a low price so as to penetrate as many college campuses as possible. That’s why ofo only asked bike makers for common-quality bikes that could meet the demand of short trip with lower price. Perhaps bike makers at that time were also confused with ofo’s requests like they were with Mobike: Why would ofo want bikes with lower quality?

In the first half of 2016, the general public didn’t like Mobike. It wasn’t until Mobike Lite was rolled out to the market that users started to stop criticizing Mobikes for being too heavy

It’s for sure that the Internet industry is really good at using the low-cost and high-subsidy strategy to grab market share for next moves. Promotion campaigns like free weekend ride, weekly free ride, and cash back etc. are still the main moves among shared bike players. However, this is only temporary as shared bike platforms would eventually have to fix serious issues like GPS problem, and damage rate.

Recently, ofo launched a new bike model, ofo Curve, in hopes of transforming from the high maintenance cost period to the low cost period and increasing the life cycle of its bike fleets.