JUNE 2018 FORBES ASIA | 21round in March, a month
before Mobike, its rival in
China, sold to Meituan-Di-
anping for $2.7 billion.
Ofo’s early start, though,
won’t enable it to coast to
success in North Ameri-
ca. here will be plenty of
homegrown competitors
to ight of ater investment
in U.S. bike-sharing and
scooter-sharing companies
topped $260 million in the
irst ive months of 2018,
according to PitchBook.
here’s another problem.
Americans love their cars
as much as the Chinese
love their bikes. “he cities
are built in a way where
it’s car-friendly and it’s not
bike-friendly,” admits Yanqi
Zhang, 32, a cofounder of
Ofo. “It did not look very
straightforward that we
could do any bike business.”
Chris Taylor, a former
Uber employee who is head
of Ofo’s U.S. expansion,
knows he has an uphill ride.
A polite Midwesterner who
hasn’t owned a car in ten
years, Taylor, 36, didn’t even
visit China before he took
the job to translate Ofo’s
business for the U.S. mar-
ket. He knew that what
worked in China, with its
cheap labor costs and little regulation, doesn’t necessarily work
over here.
But there are signs Americans can be persuaded to part with
their car-centric ways. In 2010, people took 320,000 trips on
bike-share systems in the U.S., according to the National Asso-
ciation of City Transportation Oicials. hat number jumped
to more than 28 million in 2016 with the rise of dock-based
bike-sharing, which requires customers to ride from one bike-
parking station to another.
Dock-based rentals have two things going against them.
One is that they are less convenient than free-loating leets.
he other is that the docks cost a lot of money—$3,700 for
each bike and its dock in the Washington, D.C., program. Dock
systems wouldn’t exist without either handouts from the gov-
ernment or revenue from advertisers like Citi (in New York
City) and Ford (San Francisco).
Smartphones make docks a lot less compelling. Mobike and
Ofo seized on the idea and illed the streets with brightly col-
ored bikes that anyone could scan to unlock. “We had to adapt
the business model,” says Ryan Rzepecki, the founder of Social
Bicycles, a bike-share service that operates in 40 U.S. cities and
saw two government contracts fall apart ater years of negotia-
tions. At his heels were other U.S. startups like Lime and Spin,
which are bringing the Chinese model to the U.S. Rzepecki re-
branded his company as Jump and sold it to Uber for about
$200 million in March.
Ofo’s opportunity to enter the U.S. came last year when out-
doorsy Seattle, ater investing millions in a dock-based pro-
gram, tore up the docks and opened the city to privately fund-
ed dockless systems. Ofo, Lime and Spin are all giving the city a
tryout. In six months the trio booked 469,000 trips, nearly dou-
ble what the dock-based system did during its entire 30-month
lifetime. hat’s not good enough, though, with a bike averag-
ing six uses per week, a third of what an operator will probably
need to make a proit.
In China, Ofo charges 15 cents for a ride. In the U.S. it gets
$1 and up. Buying the bikes is just the start of the operator’s
costs: It has to pay people to rebalance bikes around a city and
collect and repair broken ones. In China low labor costs mean
Ofo can hire swarms of people to comb the streets. For the
U.S. Ofo had to develop sotware that would track how oten a
bike was being used. If a bike hasn’t moved in 24 hours, then it
might be broken or in an unreachable location, and Ofo sends
someone out to collect it.
Compliance costs? Nothing much, perhaps, in Asia, but
something to be reckoned with here. Seattle requires compa-
nies to respond within two hours to any bike parking com-
plaint. In Chicago, a new pilot is requiring bikes to lock to ob-
jects like a bike rack or signpost. Many cities also put limits on
the number of bikes each company can deploy.
hen there’s the cost of keeping up at the high end of the
market. Bird, in Santa Monica, California, introduced motor-
ized kick scooters in September 2017. Spin gets $20 a day per
scooter in San Francisco (its bikes bring in around $1 a day).
Lime also added scooters to its lineup alongside electric power-
assisted bikes. Not to be let out, Ofo will add battery-powered
bikes and scooters this summer.
Hype is not enough. As Susan Shaheen, co-director of the
Transportation Sustainability Research Center, points out: Re-
member the frenzy around the Segway a decade ago? It didn’t
exactly transform transportation.
With 9 billion rides cumulatively (and 1 million in the U.S.),
Ofo is probably well short of the volume it needs to be prof-
itable on its huge asset base. But there’s no reason it can’t get
there.
he company plans to expand from 30 cities here to 100
by the end of the year. If it survives, Ofo could become one
of the irst Chinese companies to be a household name in
the U.S. “I just knew right away that this technology was ex-
actly what is going to fundamentally change how people get
around in cities,” Taylor says. “You have to have that belief to
will it to reality.” F