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Business cycle: the rise and fall and rise again of London’s dockless bikes

While the official TfL bike scheme has been running in the capital since 2010, cyclists are now faced with a brightly coloured melange of private operators all wanting to capitalise on a shift in urban transport
Uber Jump bike
Uber launched its Jump range of dockless bikes in Islington in May

In May of this year, ride-hailing giant Uber Technologies Inc (NYSE:UBER) became the latest tech firm to muscle its way into London’s cycling market with the launch of 350 of its 'Jump' brand of dockless electric bikes.

Uber bought Jump for around US$200mln in April last year and as of the end of 2018 had 15,000 bikes deployed across six countries.

Meanwhile, US start-up Lime entered London in November with its own fleet of bright green e-bikes, with another competitor, Freebike, currently operating inside the City’s square mile.

Money spinner?

Given that the initial forays into the dockless bike market in London seem to have had mostly fatal outcomes for the companies involved, why do Uber and these other groups seem intent on following a path that could end up with abandoned bikes littering streets from Kensington to Kentish Town?

The key reason is that the shared bike market is predicted to grow rapidly over the next few years, with a 2018 report by consulting firm Roland Berger estimating that it will be worth around £7.1bn by 2021 compared to £3.2bn in 2017.

Tobias Schönberg, a senior partner at Berger who authored the report, had previously said in 2015 that a multi-billion dollar market was “far from unrealistic”, citing digitisation as one of the key growth drivers behind the boom in bike sharing businesses as it made cycling “more attractive than ever” and also held the potential to integrate bike sharing systems into traditional public transport networks.

However, the firm added in its report that to stay competitive businesses will need to take a proactive approach to shaping the urban transport market by pushing for favourable regulatory change while also investing in solutions that promote the use of their services.

This is a lot easier to do when you have enough financial firepower to help a start-up business ride out the initial losses.

Chinese bust

When dockless bikes originally began appearing on the streets of the capital it seemed that the UK’s bike-sharing market was going to be dominated by companies from China.

In 2017, Beijing-based Ofo became one of the first major players in the UK, initially distributing 1,000 of its bright yellow bicycles across Hackney, Islington, the City, Cambridge, Oxford and Norwich.

Backed by around US$2bn dollars in venture capital, almost half of which came from Chinese e-commerce giant Alibaba, Ofo’s co-founder Zhang Yanqi envisaged around 150,000 of the company’s bikes inhabiting London streets.

However, by January 2019 Ofo had pulled out of Britain and practically dissolved its international business amid a funding crisis and controversy surrounding the impact of its bikes on several major cities, with local authorities alleging that the bikes were a nuisance blocking roads and pavements.

The company also suffered from theft and vandalism, having removed all 2,000 of its bikes from Sheffield six months after entering the city due to a spate of reports about bikes being set on fire or otherwise damaged.

Ofo’s implosion had been preceded by fellow Chinese firm oBike, which launched 1,300 bikes in London in July 2017 only to withdraw them four months later without warning.

Despite the failures of the Chinese start-ups, other companies, some of which are backed by the tech dollars of Silicon Valley, are still keen to break into the UK market, and by extension have more funds to back up their efforts.

While Ofo was estimated to be worth more than US$2bn prior to its collapse, that is nothing compared to Uber, which is currently worth over US$73.3bn and has successful taxi and food delivery businesses to provide cash for its ventures.

‘Shared economy’ in motion

The convenience of simply picking up a bike, riding it, and then leaving it when you’re done, seems like the epitome of convenience and the so-called ‘shared economy’ that has seen the rise of a plethora of private businesses seeking to change the way city populations get around.

And the revolution doesn’t seem to be showing any signs of slowing down.

According to data from CoMoUK, a body that advocates shared mobility, the total number of shared bikes across Britain reached 24,871 in 2018 from 17,354 two years before, while the number of users had jumped to around 650,000 from 450,000, a 44% increase.

While the official London cycle hire scheme, run by Transport for London (TfL) originally brought its Barclays (and now Santander) emblazoned bikes to the streets of the capital in 2010, residents have recently been finding themselves spoilt for choice with the new range of private competitors, all of whom have bikes with equally garish colours.

So will the financial clout of Uber eventually be able to ‘unseat’ the TfL bike as the go-to transport method for London’s cyclists? At the moment taking on the public option appears tricky.

Unlike the TfL bike scheme, private bike-sharing firms currently have to apply for permits in each of the city’s 32 boroughs, and even then can only operate within their jurisdiction.

Just before it pulled out of the city Ofo covered 68 square kilometres of the city, just over half of the 116sqkm for the TfL scheme, while Uber’s Jump bikes only operate in the borough of Islington, an area covering less than 15sqkm.

While the lack of a pan-London authority to take charge of the running of dockless bike schemes could provide a bureaucratic stumbling block, Antonia Roberts, deputy chief executive of CoMoUK, remains upbeat about their prospects in the capital.

She says that while the boroughs will still ultimately have the final say over permitting, a collaborative approach was “starting to happen already” and that TfL’s only role will be to set up a general legal framework to govern the operation of bikes to ensure they do not block roads and pavements across the city.

All of this is still very up in the air, Roberts says; however, she was confident that given recent trends a London-wide scheme may be unnecessary, with boroughs themselves deciding to “blur out the boundaries”.

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Article
April 12 2019

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