Top Biz News

Rental companies will fight for right to survive

By Cui Xiaohuo (China Daily)
Updated: 2010-01-14 07:55

Only one of the Beijing's bike rental agencies will have the chance to rescue itself from the low-profit winter, as part of Beijing's comprehensive plan to ease traffic congestion.

A sole private bike rental company will be awarded the contract after a round of bidding for the right to operate the 500 stations with 20,000 bikes citywide next year.

The number is predicted to expand to 2,000 stations with 50,000 bikes by 2015, bringing more advertising revenues, authorities predict.

Transportation authorities have already informed at least two Beijing-based bike rental companies, off the record, that bidding is scheduled to begin as early as March, separate sources told METRO.

"The sole company that wins the bid will operate like the Beijing Bus Group, which runs most of the city's bus transit," said Li Xiangyang, assistant general manager of the Fortune Bicycle Rental Co Ltd, which was confirmed to take part in the bidding.

Competitor companies will have to retreat from the market for the duration of the contract, sources said.

The director of another major bike rental company, who insisted on anonymity, confirmed that authorities have asked them to prepare for bidding in either March or April.

There are currently three major bike rental companies in Beijing: Fortune, Beijing Bicycle Rental and IbikeMedia.

All three companies recorded multi-million yuan losses last year, they told METRO.

The three companies run completely different systems that don't overlap, an issue that angers cyclists who prefer a unified system.

Hou Yi, 30, a kiosk owner who also looks after seven dusty bikes for Fortune near Xiaoguan community, said cyclists used to complain they could not find the right stations to drop off their bikes.

"Now they give up renting altogether," said Hou.

Fortune used to operate 1,000 bike rental stations citywide but cut both the number of stations and bikes by half this year to slow losses. The executive said the company is losing 500,000 yuan each week on bike maintenance and wages.

Li Weiwei, general manager of IbikeMedia, said it is frustrating that the 5 million yuan annual input in Beijing has failed to yield results.

"Chengguan inspectors often tear down our stations for all kinds of unspecified reasons," said the manager, who urges traffic authorities to write new rules in favor of bike rental services and implement them throughout their institutions.

Bike rental companies gain revenue from a business model focused on narrow profit margin advertisements. Their clients often include gynecology hospitals, Chinese fast food chains and small IT companies.

"We earn a small amount of profit. We can't charge the public anything because they expect bikes to be totally free," said Wang Yong, chairman of the Beijing Bicycle Rental Co Ltd.