Do the economics of bike-sharing schemes stack up?

O Bike in Sydney. Image: Getty.

Have you ever walked past (or tripped over) a shared bike and wondered how it’s possible for the business to survive with a ride costing so little?

While bike-share schemes attract controversy in some places, the economic models behind such schemes actually have more to do with data mining, advertising and turning a profit from interest on the deposits than from the bike rental itself.

The most recent example in my own part of the world is Obikes. Launched in Australia in mid-June, there are currently over 1,250 dock-less Obikes in Melbourne and over 1,000 in Sydney. According to its marketing director, Obike’s Australian user numbers have increased rapidly since its introduction.

However, despite the promise of cheap and convenient access to bikes, Obikes have faced a number of challenges since their very first few weeks of operation. There have been complaints about Obikes clogging footpaths and becoming hazards as a result of people failing to park them within designated spaces, as well as complaints about Obikes hogging existing parking racks, leaving inadequate space for commuter cyclists to park their own bikes.

The massive potential for bike share schemes expansion

In theory, there are plenty of possible ways to make a profit from the shared-bike business. Its lucrative business models have proved attractive to entrepreneurs and investors.


The ride-and-pay model is the most straightforward profit-generating operation - but only one method of making the schemes profitable. For example, a half-hour ride of an Obike will cost the user A$1.99. If a bike is used for 10 half-hour trips per day, the total daily return will be A$19.9. A three-month operation could collect A$1,791. This will cover the initial investment made on the bikes, as well as some operational costs such as lost bikes and repairs - depending on the frequency of bike usage per day.

Bike-share schemes can also cash in on the deposits they require from users. The majority of schemes require users to register and pay a refundable security deposit to use the shared bikes (Obike asks for a deposit of A$69). Collectively, the amount of money held in the deposit pool is potentially enormous.

One Chinese bike-share company, Mobike, reportedly had over 100m registered users in June this year. The Mobike deposit account therefore held over 30bn yuan (about A$6bn) paid by the 100m users at 299 yuan per user. The interest earned from this sum alone is a huge income-generating asset, not to mention the scope to invest this money while it’s held in company coffers.

Data services present another significant potential income stream. The user database is huge – more than 100m trackable users in the case of Mobike. This can be used for marketing and the analysis of consumer behaviour if combined with other data sets.

Users’ riding behaviour data, captured by apps and GPS, complement very well the data sets collected from taxi and public transport systems by focusing on smaller areas. This data has a high commercial value to businesses in retail, restaurants and even car sales, as well as to local governments seeking more detailed information for urban planning and management applications.

Advertising is another means to generate profit by using both the physical body of the bikes to advertise as well as the app used to locate and unlock the bikes. However, the limited usable space on a bike and the short interaction time between the user and the app make it hard to generate significant income this way.

Teething problems persist but bike-share schemes likely to keep growing

In Beijing and Shanghai, where dockless shared bikes were first introduced, bikes have been thrown into rivers, garbage dumps and even into trees. Pedestrians are forced to push their way through swathes of parked dockless shared bikes, often leaving behind a trail of fallen bikes or bikes stacked on top of one another on footpaths. The Hangzhou government has seized tens of thousands of shared bikes in an attempt to reinforce bike parking laws.

Melbourne Lord Mayor Robert Doyle has complained that Obikes are the source of so much clutter that he has threatened to ban them altogether.

In spite of these ongoing problems, bike-share schemes continue to grow into new markets globally, with new schemes in Florence and Milan the latest examples. At the same time, withdrawals from the market by less competitive or poorly executed models are occurring.

Local controversies over shared-bike schemes are expressions of how resident behaviour, municipal bylaws and cycling infrastructure are all too often proving to be unprepared to embrace and support a new mode of urban transport.

The ConversationPublic and local government criticisms and complaints may delay (or in extreme cases) even ban the bikes from particular cities. But as long as the interest for capital expansion and the broad social, environmental and health benefits are recognised, these schemes will continue to grow globally.

Sun Sheng Han is professor of urban planning at the University of Melbourne.

This article was originally published on The Conversation. Read the original article.

 
 
 
 

Here’s how Copenhagen puts cyclists at the top of the social hierarchy

A cyclist in Copenhagen, obviously. Image: Red Bull/Getty.

Have you ever wondered why Britain is not a nation of cyclists? Why we prefer to sit in traffic as our Dutch and Danish neighbours speed through the city on bikes?

Forget about hills, rain, and urban sprawl: the real reason we aren’t cycling is much closer to home. It is not just lack of infrastructure, or lack of fitness, the reason that 66 per cent of Brits cycle less than once a year, is because of status.

An obsession with social status is hard-wired into our brains. As we have built a society that relies on cars, the bicycle has slipped to the periphery, and gone from being regarded as a sensible mode of transport, to a deviant fringe-dwellers choice.

Even though cycling to work has been shown to be one of the most effective things an individual can do to improve health and longevity, researcher David Horton thinks that there are a set of collective anxieties that are stopping us getting in the saddle. These include not just an unwillingness to be made vulnerable, but fear of being thought of as poor.

A quick look over the North Sea shows that there is an alternative. Danish culture has elevated cycling to the point of reverence, and the social status of cyclists has followed. As we have busied ourselves building infrastructure that testifies to the dominance of the car, Denmark has been creating magnificent architectural features, aimed specifically at bike users. The Cycle Snake, or Cykelslangen, literally suspends the cyclist above the city, metaphorically elevating the cyclist and creating a sense of ceremony.

In doing so, they are subtly persuading people of all backgrounds to see past their prejudices or fears and take it up as the clearly better choice. This means there are more women cycling, more older people cycling, and more ethnic minorities cycling. The activity is less dominated by comfortably middle class white males: there are cyclists from every side of the community.  

The Cykelslangen, under construction in 2014. Image: Ursula Bach and Dissing+Weitling architecture.

Despite abstract motivations like getting ripped and conquering global warming, it is only when the bike path becomes the obviously better choice that people will start to cycle. It can take years of traffic jams before people try an alternative, but if you make motorists jealous of cyclists, then the tables can quickly turn.

Another way that Copenhagen has done this is by taking privileges normally afforded only to the motorcar, and given them to the bike. The city has ensured that cycle routes do not include blind corners or dark tunnels, and that they form a complete, coherent network, and a steadily flowing system – one that allows cyclists to maintain a reasonable pace, and minimises the amount of times you have to put your foot down.

The ‘Green Wave’, for example, is a co-ordinated traffic light system on some of the main thoroughfares of the capital that helps minimise the amount of cycle congestion during peak times. It maintains a steady flow of cycle traffic, so that there is no need to stop at any point.


Small measures of prioritisation like this one increase the sense of safety and consideration that cyclists experience, making it natural for the citizens of a city to act in their own self-interest and get on their bike.

As well as redefining the streets around the bicycle, the Copenhagen Cycle Chic blog positively fetishises cyclists. The tagline “dress for your destination, not your journey” depicts the social fashion life of the cycle lane as a “never ending flow of happy people heading from A to B”. Its writers are  literally making cycling sexy, dispelling the idea that going anywhere by bike is odd, and helping the world to see that the bicycle is actually the ultimate fashion accessory.

So unlike in London, where cycling is still a predominantly male pursuit, Copenhagen sees a more even split between men and women. Not just because they feel safer on the roads, but because culturally they are comfortable with their appearance as part of a highly visible group.

So while our low level of cycling is partly due to our physical infrastructure, it is also due to our cultural attitudes. The mental roadblocks people have towards cycling can be overcome by infrastructure that is not only safe, but also brings old-fashioned notions of dignity and grace into the daily commute.

Of course, office shower facilities might stop cyclists being ostracised, too.