Short investment horizon
But simply focusing on curbing the total number of bikes is not enough because the key is to have a system with clear oversight and registration requirements for companies, Yang and Chen said.
They further argued that another contributor to the problem is that a flood of start-ups entered the market without the need to meet any requirements as they were backed by short-term, speculative capital in search of quick returns.
China's bike-sharing industry, despite having no track record of profitability, has attracted 6 billion yuan in investment from such heavyweights as Tencent, Xiaomi and Sequoia Capital, according to a report from iResearch.
Manufacturers go cold
The measures to curb the number of shared bicycles has sent a chill through manufacturing hubs such as Wangqingtuo, in North China's Tianjin.
A few months ago, local manufacturers in Wangqingtuo were not shy about how they enjoyed opportunities the booming bike-sharing industry had brought. Now, some just want to wash their hands of the whole thing.
"Shared bikes caused a lot of trouble here, and we don't want to talk about it anymore," a factory owner surnamed Yan told the Global Times on Friday. "A year ago, people were almost crazy about shared bikes, but some of them ended up losing a lot of money."
Yan said he made the right decision in avoiding orders from ofo and Mobike, calling the industry's investments in added capacity to meet such demand "blind and irrational."
Such investments led to fierce competition, according to another owner of a bike frame factory surnamed Cao. About 50 percent of Cao's monthly output of 150,000 units was for bike-sharing companies such as ofo and 99 Bicycle.
Cao, a 35-year-old local resident, said bike manufacturing is a traditional family business. "In this town, we [manufacturers] all know each other, we know who makes bike frames, who makes tires, this community is transparent," he said.
But following the sudden rise of the bike-sharing industry, "those who know little about this business suddenly came to compete with us, and we saw all kinds of problems like price competition," Cao said.
More orders, more problems
The payment procedures of shared bike companies have also caused problems for factories in Wangqingtuo.
For example, ofo makes payment 90 days after taking delivery. But if there are cash flow problems at the bike-sharing companies, they may have difficulty making payment on time.
"Small producers that put too much money into capacity for shared-bike orders couldn't get paid on time and ran into difficulty," Cao said.
Meanwhile, a new round of environmental inspections have resulted in a wide range of factory shutdowns in North China's Hebei Province and the suburbs of nearby Tianjin. The on-site inspections, which run until March 29, 2018, will root out problems with emissions and pollution control equipment, according to the Ministry of Environmental Protection.
"The combination of cash flow problems and environmental inspections was too much for some small factories, which had to shut down," Cao remarked.
Beyond the factories, the sector's problems also put many jobs at risk.
In the first quarter of 2017, the shared bike sector helped create 70,000 new jobs nationwide, and bicycle manufacturers' staff and workers who maintain and organize bikes in cities were the lowest-paid on the industry chain, said a report published by the State Information Center on September 9.
The average salary of employees in the bike maintenance sector is 3,835 yuan per month while factory workers get 4,442 yuan, the report showed.
Cities, industry need solutions
The radical expansion of shared bikes in the past two years generated problems for not only urban management but also traditional bicycle manufacturing, Zhu Dajian, director of sustainable development and the new type urbanization think tank of Tongji University, told the Global Times on Monday. "Traditional bike manufacturers should not fully depend on the bike-sharing business for an industry revival, as shared bikes must be distinguished from traditional ones," he said.
Shared bikes, which are designed for public use, are part of the Internet of Things, and they have high turnover use rate, Zhu added. "They also use new technologies to produce smart locks, global positioning system devices, and so on, which is very different from producing traditional bicycles," he noted.
However, bike-sharing companies, driven by capital and investors, have been shifting their focus from offering better products to pursuing market share by putting as many bikes as possible onto city streets. "This strategy has turned some low-quality shared bikes into garbage," the director said.
At the earlier stage of the sector's explosive expansion, one ofo bike cost just 300 yuan to make, Cao noted. "With such a low cost, it can order huge numbers of cycles at once and then deploy them into cities to conquer the market," he said.
Today, more and more shared bikes can be seen broken, rusting and abandoned on streets, in fields and in huge heaps in remote urban areas. Local governments are left to deal with them and their fate has become a new dilemma.
"Halting deployment of new bikes will provide room to figure out how to manage and operate shared bikes, and who can do it better will win this battle in the near future," Zhu said.
