China’s bike-sharing boom has had its first casualty, with Chongqing-based firm Wukong announcing it has gone bust just six months after launch. Wukong says it burned through Rmb3 million in that period and that 90% of its rental bikes are missing.
For entrepreneur Lei Houyi it was a brutal experience. The founder told China Entrepreneur that he had started his bike-sharing firm after finding it hard to get taxis at his previous job. In December his team began work on an app which was finished in 20 days and then they released a first batch of 300 bikes into Chongqing’s university district. At the end of February this was followed by a second batch of 1,000 bicycles.
Lei admits things went wrong from the outset, with the bikes scattered across the city, and hard to collect. There were problems with the mechanical locks, so a costly switch to smart locks was made. However, there were problems getting these manufactured by suppliers, and it was soon discovered that Chongqing’s extremely wet climate meant that many of the smart locks became defective after a few weeks. Large numbers of the bikes (each costing about Rmb750) also disappeared. This month Lei gave up, joking to China Entrepreneur that he viewed his ‘donation’ of the bikes to the city as a public service.
The lesson learned: in order to compete with market leaders Ofo and Mobike, bike rental firms need a deep pool of capital and close ties to suppliers.
Lei doesn’t think that any of the smaller players will be able to catch up with the two biggest players. And the task looked even harder last week when Mobike announced a Tencent-led round of financing which saw the company add a further $600 million to its warchest.
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