China's cycle-sharing startup Ofo Bikes: India is strategically important for us

China’s cycle-sharing startup Ofo Bikes, which announced fresh funding of USD 866 million led by Alibaba Group, considers India an important market owing to the growth potential and talent resource.

“India is strategically very important for us, for the kind of market that exists here, and also for the amount of resources in terms of talent that is available here. The funding will allow us to expand our services to more cities globally and within India itself,” Rajarshi Sahai, India’s Director of Public Policy and Communications at Ofo told Moneycontrol.

In July, the Alibaba Group, along with cab aggregator Didi Chuxing and DST Global, had pumped in USD 700 million into Ofo, which triggered its global expansion, even as it faced stiff competition in its home market.

Ofo’s entry into India is a significant one, considering they are the first foreign player in the segment to do so. The funding, which is believed to be one of the largest fundraises by a bike-sharing company, is bound to add more muscle to the company.

With strong investors backing it, and deep pockets to compete, Ofo’s entry is sure to intensify competition in a nascent segment. Homegrown startups including ride-hailing firm Ola and Sequoia-backed self-drive car rental startup Zoomcar had announced their respective foray into the segment late last year.

Incidentally, Didi Chuxing, DST Global, and SoftBank, are also investors in Ola.

Zoomcar had announced its entry into the app-based bicycle sharing market with Zoomcar PEDL in mid-October, and had launched its services in select locations in several cities. Ola had launched Ola Pedal in the first week of November at the IIT-Kanpur campus and is looking to expand to other campuses. InMobi co-founder Amit Gupta, who had recently quit the firm, has also launched a bicycle sharing startup called Yulu.

Ofo launched in India in January, when it signed a memorandum of understanding (MoU) with the Pune Municipal Corporation (PMC), to create city-wide bicycle networks. Ofo has launched its service in seven Indian cities on a pilot basis, including Indore, Ahmedabad, Bangalore, Delhi, Pune, Coimbatore, and Chennai to start with.

The company, which handles about 32 million rides every day in 250 cities across 21 countries, is taking a cautious approach in India. “We are studying each market carefully first and taking a decision on next city launch very carefully. There are certain challenges and we want to jump into it with proper knowledge and study,” Sahai says.

The company did not reveal which city will be their next destination “because there’s no fixed plan”. But Sahai explained that the company will take a government-first approach for expansion in India, tying up with state governments and municipal authorities to help smoothen out regulatory shortcomings.

Ofo had adopted a similar strategy in its home market also. It works very closely with the local governments to create a robust model for parking cycles at convenient access points across cities, and in many cases, the company signs MoUs with the local government to ensure that spaces are clearly defined. This helps the company scale up faster.

However, Chinese operators suffered from lack of technology that could track and monitor bike assets left at the docks, leaving them exposed to theft.

In India, Ofo has opted for a station-free bike-sharing concept. The company has placed a field staff at several hotspots, who keep an eye for the bicycles being dropped, which are taken back to a repair centre. “We have also invested in technology. We monitor the cycles through telematics, geo-location to understand trends such as where people like the most popular hotspot for cycle pick up or drop, mileage progression, usage patterns, and so on,” Sahai says.

While India is a different market than China, Sahai says, similar properties between the two countries, such as vast and heavily populated cities, will help the company deploy its expertise back in India.

Moreover, like China, India too has a burgeoning mobile payments ecosystem. Companies like Uber, Ola have made fortunes by adding a simple online payment gateway.

Similarly, Ofo has tied up with India’s leading digital wallet Paytm, which is also backed by Alibaba, to make it easy for customers to pay for rides. Paytm was also the first wallet to tie up with ride-hailing giant Uber in India.

Much like Ofo, Ola and ZoomCar are also adopting a similar approach and are targeting residential townships and educational institutions to build the market. Launched in December, Ola had said its Pedal service was gaining massive interest from campuses and cities across the country.

But Sahai insists there is no aggressive competition. “I am personally working with all these stakeholders to come together and build an ecosystem. As many players there are in this segment more it will be talked about. That’s good for us.”