Will Hello TransTech Survive In The Chinese Bike Sharing Market?

A recent Research and Markets report estimates the global dockless bike sharing market to grow 21% annually over the period 2017 to 2022. But while global forecasts may sound appealing, China is witnessing an implosion in the industry. In 2017, China had nearly 40 bike sharing companies operating across its cities, with Beijing alone witnessing more than 2.3 million bikes from 15 providers. But since then, a few of these players have shut down and filed for bankruptcy. But recently, Billion Dollar Unicorn Hello TransTech raised additional funding, raising some hope for the industry.

Hello TransTech’s Offerings

Hello TransTech, more popularly known as Hellobike was founded in 2016 by Han Mei. By the time Hellobike decided to enter the Chinese market, there were already two big players in the region – Ofo and Mobike – both of whom had been operating for more than three years. In fact, both of these players had already raised their Series C rounds and the country was already witness to millions of bikes lined up on its streets.

Hellobike was aware of its latecomer status and thus focused on the second and third-tier cities in China as part of its focus market. Analysts believe that in China, about 72% of China’s bike-sharing users are from its lower-tier cities, and the first-tier cities account for 28% of that market. Hellobike also entered into tie-ups with companies like Ant Financials so that users can use Ali Pay’s wallet to use the service instead of downloading the Hellobike app.

Its strategy has played well. By October 2018, Hellobike had established a stronger presence in these smaller cities. According to its reports, it was witnessing an average of 3-5 rides per day in these cities while its rivals clocked less than three rides in the tier 1 cities. It has established its presence in more than 300 cities in China and has clocked over 20 million rides a day to become the third biggest player in China.

Hellobike is now focusing on expansion to become a transportation platform, instead of a pure bike sharing service. Last September, it rebranded itself to Hello TransTech as it moves towards other services such as shared electric bikes, ride-hailing, and car-pooling. It has already launched motorized bikes in more than 100 cities.

Hello TransTech’s Financials

Hello TransTech is privately held and does not disclose its detailed financials. As of December 2018, analysts estimated that it generated $1 million in revenues annually. Like other players in the industry, the company is still not profitable. It has raised $1.8 billion in funding so far from investors including Primavera Capital Group, Ant Financial, Fosun Group, WM Motor, Chengwei Capital, and Fujitec Co. Its last round of funding was held last year when it raised $400 million at an undisclosed valuation. Analysts estimate that prior to the funding round, its valuation was already more than $2 billion.

Bike Sharing Industry’s Woes

Like other geographies, the Chinese authority is also coming down hard on the bike sharing vendors. Last year, the authorities banned introduction of additional new bikes in China’s four biggest cities – Beijing, Shanghai, Shenzhen, and Guangzhou. The ban was in response to the growing nuisance of illegally parked two-wheelers. Hellobike may not focus on the big cities, but admits that the ban will make it difficult to expand its market presence.

Overall, the bike sharing industry in China has imploded in the recent year. Several Chinese players such as Bluegogo and Mingbike are filing for bankruptcy. Ofo itself is said to be struggling with cash and profitability concerns. Recent market rumors suggest that Ofo may be interested in a merger with Hellobike. If the merger happens, the companies will have access to both the tier 1 and lower tier markets.

As users of the bike sharing services, what other features do you think these service providers can offer that will help them stay in business? What would you be willing to pay extra for?

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