Bike-Sharing Boom Brings Manufacturers Orders, Hits Retailers Hard
Yicai Global
/SOURCE : Yicai
Bike-Sharing Boom Brings Manufacturers Orders, Hits Retailers Hard

(Yicai Global) March 3 -- Bike-sharing services attracted investors and swept across multiple cities in China since last year. The industry's rapid development has brought many unexpected orders to manufacturers and had a huge impact on retailers.

Bike-sharing firm Ofo Bicycle Co. announced the completion of a USD450 million financing round this week. Foxconn Technology Group [TSE:2317] invested in Mobike Technology Co. last week and will open production lines for the Beijing-based company.

More than 30 investors have poured billions of yuan into the bike-sharing service industry and the capital influx has revitalized bicycle manufacturing.

Shenzhen is bicycle manufacturers hub in the Pearl River Delta region and boasted more than 20 producers in its peak. Now, there are only seven or eight due to the market's waning in recent years. The boom of bike-sharing service has injected fresh energy to the market.

Hu Zefeng, general manager of bicycle manufacturer Shenzhen Laux Bicycle Co. said his company has received orders for 1.5 million bicycles.

"It's just like a sudden flood. Buyers are willing to buy all the bikes we can produce -- no matter how many," said Tan Weilong, board chairman of bicycle producer Shenzhen Xidesheng Bicycles Co. "The more, the better. Now, we've expanded our production capacity by 10,000 bicycles per month, but they desperately hope that we can produce more. Our workers work 11 to 12 hours a day, seven days a week now."

The boom of bike-sharing service has injected new life into the bicycle market. Manufacturers and parts producers have been inundated with orders, and factories are working at full capacity. Some manufacturers felt an urge to invest and build more factories. Others began to worry.

Because of the rapid growth in demand, the entire industry is increasing production capacity now and if this continues, there will be a production surplus, Tan said. "I'm worried that there won't be so many orders next year if I investment more."

Bike-sharing deals a blow to retailers

Manufacturers of bikes and parts began to expand capacity after receiving large orders, but bicycle retail stores have been hit hard. Bike-sharing's convenience has made it popular and shared bikes have become an increasingly important means of transportation, but fewer people are buying bikes.

Ordinary bicycles have not sold well since bike sharing was launched, said He Changlun, owner of a bicycle retail store. He only sold several bikes this year.

Some retailers are opting to sell electric cars instead of bicycles since the emergence of bike sharing.

Shangsha village in Shenzhen used to be home to dozens of bike stores, which would sell or rent bikes. Since bike-sharing took off, their customer base has diminished rapidly, and some shops have been shut down.

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