BICYCLE-SHARING programs have become big business as their popularity grows. But as more players jump into the trend, skeptics wonder if it’s all too much, too soon.

THE crowded market of shared-bicycle services in Shanghai is expected to swell even further this year, leaving some market watchers wondering just how much more capacity is actually left to tap.

The number of shared-rental bikes in Shanghai nearly doubled in less than three months to 280,000 bicycles by the end of February.

“Major shared-bike operators are resorting to price wars and increasing the supply of vehicles, but none has really developed a sustainable business model, meaning that operating costs soar as they grab a bigger market share,” said Dong Yizhi, a researcher at China E-commerce Research Center.

Public rental bike programs first emerged in China about six years ago, giving people the option of leasing bikes for short trips and then returning them to designated parking areas or service stations at their destination. District authorities often teamed up rental bike companies to set up parking spaces near popular transport and retail hubs.

The trend quickly expanded from a public service to the private sector money-spinner as smartphone applications offered users more efficient ways of finding available bikes and paying for their hire through mobile payment services. Bicycles are unlocked via codes provided on smartphones. Renting a bicycle has never been easier.

Ofo, Mobike and Youon emerged as the three biggest players in the industry by the end of 2016, according to Analysys International.

Changzhou-based Youon Public Bicycle Co is backed by Shenzhen Capital Group Co and Alibaba Group’s Ant Financial as major investors. Its Internet-based bike rental arm launched its service in Shanghai late last month, making 5,000 bikes available in the Lujiazui area on the eastern shore of the downtown district.

The majority of Youon’s revenue comes from government purchases of public rental bikes. In 2014, the company reported profit of 68 million yuan (US$9.9 million), according to initial public offering documents submitted to the securities watchdog in 2015.

Shenzhen Capital Vice President Liu Bo said he expects Youon’s presence in public rental bike programs in more than 200 cities to help its expansion in Internet bike sharing.

Youon, which is teamed up with Ant Financial unit Zhima Credit, waives the 200-yuan deposit for users with a Zhima Credit rating of more than 600 points. It is also encourages commuters to park bikes at designated spots by awarding them a one yuan bonus each time.

Ofo requires a deposit of 99 yuan to hire a bike, and Mobike demands a 299 yuan deposit.

Easy to shift

How newcomers in the industry will compete with entrenched services like Mobike and Ofo remains unclear. But for riders, shifting between service providers is no sweat.

“I’d be more than happy to give it a try when Youon’s bikes are available in the Puxi area, especially since it doesn’t require a deposit,” said freelance writer Rachel Ren, who rides a rental bike three to four times a week to do her grocery shopping.

According to online tracking firm Questmobile, the average daily use of the two biggest Internet rental bike firms began to pick up significantly in August last year. By the end of January, Mobike had a 6.9 million users base and Ofo had 3.2 million. However, more than 1.2 million users overlapped both providers.

Although users laud the convenience of rental bicycles in daily commutes, the services are still suffering growing pains. Glitches such as electronic locking devices that don’t open, malfunctioning vehicles and miscalculation of locations or driving distances still prevail.

Where to park the increasing number of bicycles has become a headache in congested areas, such as transport hubs and Metro stations.

Jasmine Zhang, whose home is five-minute away walk from a downtown Metro station, said she finds hard to navigate pedestrian walkways during peak hours because sidewalks are overflowing with rental bikes.

According to a survey of 6,000 online consumers by Tencent in December, 58 percent of respondents said they prefer to riding bikes to walking, and 49 percent said they have used online bike leasing for short-distance trips. The majority said they use the bikes for commuting.

Mobike and Ofo have launched promotions, such as free rides during weekends, to attract more customers. Mobike last week started to offer up to a 50 percent discount when users top up their account balances with the company.

Bicycle-sharing has certainly caught the attention of investors. Mobike reported raising more than US$315 million in less than a year, and Ofo said it raised over US$580 million. The figures suggest much faster and bigger fund-raising than online car-hailing service companies once enjoyed.

But maybe the car-hailing experience tells us something about the future of two-wheel rentals.

A lesson to learn

Just three years ago, cutthroat competition reigned among online car-hailing applications. Didi and smaller rivals Kuaidi and Uber fought for consumers with cheap fares and occasional free rides and coupons. Before long, investors called a halt to the money-losing price war and costs to consumers went up. Didi finally acquired Kuaidi and Uber in an industry consolidation.

Too much hype, too many gimmicks and too many players in a blind market expansion portend a lack of critical focus on consumers and their needs, possibly sowing the seeds of major upheaval in the industry.

Guo Jianrong, secretary general of the Shanghai Bicycle Association, said he thinks the city has the capacity to meet consumer demand for 600,000 rental bicycles.

The association is drawing up industry standards for bicycles leased via online platforms, including maintenance criteria and parking issues.

Clashes between private operators of shared bikes and district transportation authorities are increasing. Huangpu District traffic authorities last week removed thousands of Mobike and Ofo bikes from public parking areas, arguing that they are jamming pedestrian walkways and squeezing out parking spaces for privately owned bikes.

Technology companies are not fully utilizing data to detect the locations where rental bikes are dropped off and left unattended. Local transportation authorities complain that unattended bikes often invite theft and vandalism. But with each district responding to the problem in its own way, online rental companies are facing a tangle of regulations.

Wu Ting, a partner at McKinsey & Co, said companies operating in the sharing economy must adopt sustainable business models, either by offering premium services to charge consumers with higher prices or by lowering operation cost through technology upgrades.

Indeed, the benefits of the sharing economy shouldn’t be defined merely by cost savings. Rather, they should take into account social value and the well-being of drivers, riders and pedestrians alike.