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FORTUNE.COM // JANUARY 2020
with billion-dollar-plus valuations.
By the end of 2018, however, several leading
bike-sharing companies had gone bankrupt,
and now the bicycles that were once viewed as
one of the country’s great disruptive inventions
have largely become inconvenient and colorful
stains on city streets or have been sent to mas-
sive bicycle graveyards.
“Bike sharing was one of China’s biggest
innovations, so everyone was championing
it,” says Chen Lin, a marketing professor at
China Europe International Business School in
Shanghai. “Nobody saw the rise and fall being
so quick and so dramatic.”
The rapid ascent and even quicker spectacu-
lar collapse of China’s bike-sharing sector may
presage future problems in one of the world’s
technology powerhouses. The bike-sharing
phenomenon hasn’t prompted reflection across
China’s technology industry, analysts say, and
the issues that spurred its downfall may soon
inflict its miseries on new industries. “Nobody
was questioning the investing patterns” behind
TECH
connection to two-wheelers helps explain how
bike sharing took off so quickly and on such a
massive scale (being environmentally friendly
and convenient helped too).
“It was a fantastic innovation, in that it
really looked at the consumer journey and
pinpointed the way that people needed more
convenient and accessible travel,” says Chen.
Ofo, the company whose founders were
members of that Peking University cycling
club, was at the center of the industry’s rise af-
ter it launched in 2014. At its peak in 2017, Ofo
was worth close to $2 billion following several
rounds of funding and had expanded to hun-
dreds of cities in nearly two dozen countries.
THE FALL BEGINS
OFO WAS FAR FROM the only company in the
market, however, and competition from com-
panies like Mobike and Bluegogo launched a
loss-making race to grab market share.
For Chen, the unsustainable rise of the
sector was made possible by two factors:
easy-to-mimic product features and overeager
investors.
“There was no intellectual property, and
the bike-sharing boom, says Henrik
Bork, founder of Beijing-based con-
sulting firm Asia Waypoint. “Now
it is shifting to new hot issues.” For
example, investors are enthusiastic
at the moment about artificial in-
telligence and big data companies.
These may have little in common
with bike sharing and may prove
to be better businesses—but those
differences aren’t likely to prevent
another boom-bust cycle. “Many
people are easily blinded by the fact
that China’s economy is still grow-
ing,” Bork says. “But in reality, it is
difficult to make money anywhere,
even in China.”
THE RISE OF CHINA’S BIKE SHARING
CHINA WAS ONCE known as the King-
dom of Bicycles, with its govern-
ment famously defining prosperity
for Chinese citizens in the 1970s as
the ability to own a bike, claiming
that it would put a Flying Pigeon,
a state-owned bicycle brand, “in
every household.” And even though
cars have overtaken bicycles on
China’s streets, the country’s deep
PEDAL POWER
Though cars
now outnumber
bikes on China’s
streets, the
country once was
the Kingdom of
Bicycles, making
it fertile ground
for a disruptive
bike-sharing
business model.
