Faltering bike-share industry receives lifeline in SG Bike and Mobike tie-up

With 25,000 bikes set to be added to its fleet, SG Bike will soon hold the crown as the city’s largest bike-sharing operator.

The struggling bike-sharing industry in Singapore has received a boost after homegrown firm SG Bike forged a partnership with Mobike in a deal that will see the former absorb 25,000 bicycles from the Chinese bike-sharing unicorn. 

Currently available at Yishun, Tampines, and East Coast Park area, SG Bike is aiming to expand its reach and hit the streets of North, North East, East and West once the Land Transport Authority (LTA) approves the transfer of Mobike’s license to SG Bike. With their current licenses, Mobike can operate a total of 25,000 bicycles and SG Bike can operate 3,000.

“Overall, we are confident that bike sharing can succeed as the 4th mode of transport in Singapore. We have seen and experienced ourselves the convenience of bicycles and we are committed to bring that convenience to everyone with the increased fleet size and proper strategic deployment,” Benjamin Oh, marketing director at SG Bike told Singapore Business Review.

SG Bike will purchase the license issued by the LTA to Mobike along with unutilised amount of licensee fees for US$875,000; the security deposit paid to the regulator for US$550,000; and 25,000 bicycles for US$422,800, according to an SGX filing by ISOTeam which owns 51% of SG Bike. 

Following regulatory approval and the necessary systems integration, SG Bike users will be able to unlock both SG Bike and Mobike bicycles using the SG Bike app. Mobike users with deposits can continue to make requests for refund and all user deposits will be converted into SG Bike account credits without expiry once the deal is completed. Both parties are working towards September 13 as the initial deadline, the firms said in a joint statement.

"This partnership brings economies of scale to both the operator and consumers, according to Wang Yunming, Venture Partner at Quest Ventures. "Because the number of operators is now reduced, it also importantly minimises 'bike-hopping' where a misbehaving consumer changes operator whenever he is penalised for inconsiderate behaviour such as indiscriminate parking."

Also read: QR code parking system for shared bicycles to launch

In March, Mobike applied to surrender its Singapore license to the LTA in a development that marks back-to-back exits from the bike-sharing scene. Once Singapore’s largest bike-sharing operator, Mobike was forced to rethink its global ambitions and focus on its Chinese operations following financial difficulties in its home market.

Mobike's deal with SG Bike has been largely lauded as a way to ensure the sustainability of the faltering bike-sharing industry. "I think this consolidation will certainly help make ride-sharing platforms in Singapore more sustainable, but it proves that, for some verticals, unrestricted growth at the cost of all else is no longer an acceptable strategy," said Justin Hall, partner at Golden Gate Ventures. 

“In some ways, it's a good development for SG Bike as it has the opportunity to drive a monopoly business in a relatively public transport friendly Singapore,” according to Ramesh Raghavan, vice-chairman at Business Angel Network of Southeast Asia (BANSEA). “The fundamental problems of being asset heavy and high operating costs remain and some of it may be mitigated by being a monopoly provider with scale.”

SG Bike is already working towards beefing up its resource and manpower requirements in anticipation of the increased bicycle quota, according to Oh. Oh hopes that the partnership will capitalise on the government’s car-lite push which specifically sets out to ensure that every HDB town will have its own cycling network by 2030.

In its Land Transport Master Plan, the LTA aims to set up additional bicycle parking facilities at bus stops and MRT station exits with the goal of setting up 267,000 bicycle parking spaces by 2020. More space will also be allocated to Walk-Cycle-Ride transport schemes starting with 11 precincts including Kampong Bugis, Jurong Lake District and Woodlands Regional Centre.

“After some high-profile exits, there may be pockets of insatiable demand [for bike-sharing] out there. An industry 'shake-out' like what happened is not unusual in emerging technologies or industries,” observed Terence Fan, assistant professor at Singapore Management University (SMU).

Fan was referring to the string of difficulties besetting bike-sharing players in Singapore. Mobike’s exit from the market it once dominated comes months after the license of Alibaba-backed ofo was suspended in February 2019. oBike and ShareBikeSG similarly exited the domestic market in 2018 in a surprise development that left users reeling.

Also read: Bike-sharing firms hit a dead end in Singapore

The asset-heavy nature of the bike-sharing industry also continues to pose operational issues to operators especially as a growing number of users requires a larger fleet to continue serving them, Raghavan said in a previous interview. “One can probably try to remedy some of the issues by effectively building route optimisation by identifying routes where most residents are likely to use bikes. They could develop last mile transport capability by identifying key MRT and bus stops that can generate maximum bike rides and using those stops as SG Bike hubs,” he said, adding that operators could also sign deals with universities to encourage bike usage as part of their CSR initiatives.

However, Fan added that the partnership does not require the two players to offer the exact same price points and operating conditions as they learn from the lessons of the past and adjust their strategies in order to ensure their sustainability. “Whilst the partnership itself does not solve the fundamental issues that plague Mobike, SG Bike hopefully is aware of them and are able to develop innovative solutions to solve them together,” she said.

“That does not mean that the shared bicycle model will be dead, it's just that players may need to tweak their operating parameters to be profitable in the long run.” 

Photo from SG Bike's Facebook page