Moneycontrol
Apr 18, 2018 03:08 PM IST | Source: Moneycontrol.com

India market fastest growing markets among other international markets: Ofo Bikes

Since its launch in January this year, Ofo Bikes has already clocked 1.1 million rides till the end of March

Durba Ghosh @durba1985

China’s cycle-sharing startup ofo Bikes is taking its learnings from home market seriously. The company, which was first ever to introduce dock-less, station-free bike sharing, has shed its rapid expansion strategy to adopt a more “scientific approach in India, where we see, observe, learn, and then implement,” said Dexter Sim, Regional Expansion Manager for APAC, Ofo Bikes.

The company, despite being a market leader in China along with rival Mobike, struggled to find profitability. The company, along with a dozen other players, lost money to price wars in order to combat fierce competition.

“India is one of the fastest growing markets for us among other international markets we are present in. We now have a team from Australia travelling to India too, for training,” Sim told Moneycontrol.

Since its launch in January this year, ofo Bikes has already clocked 1.1 million rides till the end of March. ofo’s service is still on a pilot stage in 7 cities including Delhi, Pune, Coimbatore, Indore, Ahmedabad, Bangalore, and Chennai. In comparison Zoomcar, which launched its PEDL service in November last year, completed 1.4 million rides across a network of 10 cities.

ofo Bikes, however, isn’t charging its users on a per hour basis as of now. The company has a one-time deposit charge of Rs 99 and its rides are free. The company plans to launch its service for commercial use by June this year and has set a target price of Rs 10 per half n hour.

Zoomcar’s PEDL is currently charging the same price. Ola’s Pedal offers rides free for first 30 minutes, and charges Rs 5 for every 30 minutes post the free ride.

“We have set a target price; we may go below this in the initial phase, due to promotions and discounts. There has to be a balance. Business has to make profit,” Sim says.

 Different Approach

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

While Ola and Zoomcar are relatively new in the segment, ofo Bikes is present in 250 cities across 21 countries, handling 32 million rides a day. ofo’s experience in international markets has helped the company refine its strategy to find a sustainable business model for bike-sharing.

For instance, ofo is not sticking just to tier 1 cities for its initial launch. It has spread its network across smaller towns also. “It’s not just a matter of size. It is about the kind of support system we see there. In Coimbatore, the state government has been fully backing us. The smart city division has also been supporting us. We have 16 other cities inquiring with us if we will launch there. Support from the government is a major factor for us,” Sim says.

In China, ofo Bikes and other incumbent players had run into regulatory trouble when several dozen Chinese cities had restricted the deployment of new bikes. Stricter laws asked for license plates on the bikes, which can escalate cost of compliance.

In India, ofo Bikes is first approaching the government bodies to run the pilots. The company launched its first market in India – Pune – by signing a memorandum of understanding (MoU) with the Pune Municipal Corporation (PMC), followed by Coimbatore. These partnerships also include collaboration in building infrastructure around the bike-sharing service. The company plans to take the government-partnership approach for all its future expansion plans in India.

“There is a stigma that Indians in general, who move up the economic ladder, move on to cars. It has a lot to do with the on-ground infrastructure and it is easy to blame the government. But we have observed that the government is more than willing. The smart city project is testimony to that,” Sim said.

 Docked vs Dockless

Government’s support to implement solutions that cater to smart city projects is not a secret, “but how do we implement it, is the question.”

The Karnataka government, for example, had allocated Rs 80 crore just to set up docks across Bangalore for a network of 300 cycles. In contrast, ofo’s dockless cycle sharing model costs a fraction of that.

“Docked system is extremely capital intensive. There are several companies around the world that shut shop because docked system meant too much cash burn. A typical dock is 10 times the cost of a bicycle itself. And with every cycle you need to increase docks,” Sim says. ofo imports all its bikes currently, and acquires them at a cost raging from USD 100 to USD 200. The company is, however, committed to source India-made bicycles in near future.

But ofo’s dockless, station-free cycles created a different issue altogether. With no monitoring system in place, bicycles were repeatedly vandalised or stolen. Images of hundreds of bicycles abandoned and piled over each other went viral, questioning the sustainability of the model.

Sim, however, said that the issues have today been resolved. “It’s a general business risk that bike share players have to take. It is a problem and we acknowledge it. But finding a solution to it is a process. We are constantly learning and improving. Without that learning dockless bikes wouldn’t have been thought of,” he said.

In India, ofo 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. The company has also invested in technology to monitor bicycles through telematics and geo-location to understand trends such as which spots are most popular for a pick up or a drop, mileage progression, usage patterns, and so on.

Taking a cue from its China market, the company will also incentivise riders to influence good parking habits.

According to Sim, the next two years will be the testing time to validate ofo’s business model in India. “We are here and we want to expand. But success here will depend on several factors, including infrastructure and regulatory will.”

For now, the company is taking its time to study the market. “The growth in India will not be as fast paced as in China. Unlike China, India has different pockets with different languages, lifestyle, and infrastructure. One strategy cannot fit in all the regions,” he signed off.
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