INTERNET: Shared Rides See Merger, Fund Raising, Shutdown

Bottom line: A merged company combining Youon and Haluo could emerge as a strong regional shared bike company, while Shouqi could likewise emerge as a strong regional player in the private car services space.

Shouqi raises new money

China’s shared ride space has been on a turbulent ride of its own this past year, as billions of investor dollars flooded into a sector with big but also limited potential. The result has been the typical bloody battle for market share, which is starting to result in a trickle of mergers, closures and even one new fund-raising in the latest headlines.

In the merger column, a couple of second-tier shared bike operators, one named Youon and the other named Haluo, are formally getting together, perhaps presaging more mergers ahead. The second development has seen Shouqi, a private car services company operated by one of Beijing’s top taxi companies, raise a fresh 600 million yuan ($91 million) in cash. And the third is seeing a shared car company called EZZY formally throw in the towel, leaving its users little hope of recovering their 2,000 yuan deposits.

Of the four names in this shared riding economy round-up, I’ve heard of two in the past, namely Youon and Shouqi. That’s somewhat significant, because it shows that the clean-up coming into the space is starting to reach up into the more significant realms. Up until now, most of the companies I’ve seen going belly-up have been no-names that entered their sectors relatively late and weren’t very well funded.

Like all consolidations in China, this particular one looks set to be messy and will inevitably leave lots of carnage. That could be good for bargain hunters looking to buy a used car or bike, but will inevitably result in the usual cries of protest from unpaid workers and users who suddenly find themselves minus their salaries and deposits. When the dust settles, I expect there may be one major shared bike operator and perhaps two or three regional specialists left. The same should be true for the private car services space, and I doubt the shared car model will survive at all.

All that said, let’s begin this shared ride round-up with the biggest of these news bits, which appears to be the merger between Haluo and Youon. (Chinese article) The merged company will be headed by the founder of Haluo. Youon made headlines earlier this year when it became the first shared bike company to become listed.

But the reality was always that Youon was a bike manufacturer first and foremost, and that it was more of a Johnny-come-lately into the shared bike space, which is more of a service-oriented endeavor. Accordingly, it’s not too surprising that it is offloading that part of the business to Haluo, and the pairing actually should provide the newly merged company with a fairly reliable manufacturing partner.

All that said, perhaps this newly merged company will emerge as a solid regional player in the space. That would complement a likely major national player from one of the two current leaders, Ofo or Mobike, or possibly a merger of those two, following recent reports that investors behind that pair are pushing for just such a merger.

Shouqi Raises Funds

Next there’s the fund-raising by Shouqi, the private car services arm of one of Beijing’s leading taxi companies launched earlier this year. (Chinese article) The lesson behind this particular story is that Shouqi represented regional entrenched interests fighting back against newcomer ride sharing services like Didi Chuxing, which has emerged as the national leader. Shouqi successfully got its home government in Beijing to roll out measures severely limiting Didi’s ability to hire drivers and put cars on the street.

As a result, Shouqi is now doing quite well in its home market where it otherwise would have had difficulty competing with the likes of Didi. Again, I would say that Shouqi has a good shot at emerging as a strong regional player in the private car services space, thanks in no small part to its help from Beijing. Other regional players could find a similar path to success by depending on their ties to local government.

Finally we’ll sign off with the whimper that was the closure of EZZY, a shared car service that apparently was ahead of its time. (Chinese article) Not surprisingly, word of the closure is coming from stiffed customers who are unlikely to get back their 2,000 yuan deposits, rather than any official word from the company itself.

Shared cars seems like an idea that was probably too ahead of its time, due to the huge limitations of their numbers and also logistical issues like parking spaces. At least shared bikes could be flooded on the streets and parked anywhere, and even they are running into trouble. At the end of the day, shared cars appear to have run out of gas, and I’d reiterate that shared bikes and private car services are likely to consolidate to a state of one or two major national companies with a few smaller regional players.

 

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