UK bike-sharing companies at risk from predatory pricing

The representative body for bike-sharing companies in the United Kingdom has warned that operators are in jeopardy of being priced out of the market by wealthy competitors from China.

The first dockless bike-sharing company launched in Britain less than a year ago and the concept has since spread widely.

Six operators, including Chinese giants Ofo and Mobike, now compete in nine cities across Britain, offering customers cheap rides and local authorities free transport infrastructure.

"I don't suppose all of them will be around in two years' time," said Antonia Roberts, director of Bikeplus, the informal governing body for bike-sharing operators in Britain.

In China, the birthplace of the smart bike phenomenon, analysts have long warned that the sector is a bubble, with a surplus of operators backed by too much funding competing for too little profit.

During the last six months, four of China's 30-plus operators, including the third-largest, Bluegogo, have gone bust. Bike suppliers and many users who paid deposits were left out of pocket.

The two biggest players in China – Ofo and Mobike – have more than 90 percent of the market. Last summer, the two companies secured a combined $1.3 billion in funding, enabling them to set low prices and run long promotions.

Lei Houyi, founder of failed operator Wukong Bicycle, said to Chinese media at the time: "Ofo has lots of bikes and even offer the bikes for free. How can we compete with that?"

In the UK, Bikeplus has developed accreditation criteria that includes a clause on "ethical pricing".

"We need to ensure there isn't undercutting and an unsustainable approach to promotions," Roberts said.

Tom McGovern, who co-founded Irish bike-sharing company Urbo, said there needs to be regulation, not just guidelines.

"We don't want to see any predatory pricing in the UK," he told trade publication Bikebiz. "And councils have to strongly consider the number of operators."

Bikeplus recommends that no more than two operators are allowed to compete for business in a city of fewer than 150,000 people, which is about the size of Oxford. Currently, Oxford has four dockless bike-sharing companies – Ofo, Mobike, Pony Bikes, and oBike – as well as a scheme that uses docks.

"It isn't going to work," Roberts said. "There aren't enough customers, and the potential for undercutting to get that market share is what none of the companies wants."