The New Bikeshare Boom: A Triumph Of Riders And Business

How do you make a bicycle scary to urban planners? You let it earn a profit.
By Asher Meyers | Nov 13, 2017 |
By Asher Meyers | Nov 13, 2017 |
LimeBike is one of many emerging private bikeshare models. / company photo

For the past decade, bikeshares have been spreading across cities, with residents and tourists alike using the bikes for quick jaunts around town. According to US NACTO figures, rides per day went from a third of a million in 2010 to 28 million for 2016 – a nearly 100x increase. For the last two years, bikeshare has been growing at about 25% annually.

Sounds like a lot, until you realize that Americans take some 400 *billion* trips a year, the vast majority of that by car.

Bikesharing’s Potential

Bikeshares are a terrific opportunity for cities. They can help reduce car travel and parking demand, increase physical activity while providing extremely economical transport – historically 10-20% of the cost of a transit pass. With 50% of trips being 3 miles or less, there’s plenty of potential for biking to replace driving. One of the biggest impediments to cycling is simply not having a working bike. Shelling out hundreds of dollars for a bike may not be so appealing, if you aren’t even sure you’ll ride it.

Bikesharing 1.0: ‘Stationary’ Bikes

Until recently, bikeshares all relied on ‘docks’ – all bikeshare trips had to start and end at dedicated bikeshare stations. If there was no bikeshare dock near both your origin and destination, bikeshare was not an option. Navigating from station to station was trying enough, let alone if your origin lacked bikes or your destination lacked empty spaces.

With docks costing tens of thousands of dollars, and the bikes themselves costing $1,000+, bikeshare facilities are tightly rationed, lest they go underused. Bikes are constantly shuttled from full stations to empty ones, especially in hilly areas.

System rollouts are slow, and expansions of service even slower. My home of Los Angeles has a fragmented system that covers only a small portion of the city, let alone the region. And for city budgets, the systems often require millions of dollars in subsidies per year to survive – a pittance in comparison to regional car subsidies, naturally, but an impediment nonetheless, especially when users tended to be higher income.

These bikeshares operate on the “tax foreigners living abroad” revenue model pioneered by a Monty Python character – temporary passes cost far more than monthly or annual passes, and are responsible for a large portion of system revenues – around half, in the case of DC. That price premium suppresses occasional bikeshare use by residents.

Enter a new generation of bikeshares

With the newest generation of bikeshare, there are no docks. Bikes are stocked with GPS that track their location. Chinese pioneers of the model put the cost of each bike at about $400. Rides tend to cost $0.50 to $1 per half hour in the West, and about $0.10 in China.

Seattle is at the forefront of dockless bikesharing in North America. Its own municipal bikeshare, Pronto, failed to cover costs, some say due to stringent helmet requirements. The bikeshare was shuttered, and the city invited dockless bikeshares to set up shop. Now, the city has two private providers, Limebike and Spin, with each providing 1,000 bikes, the maximum currently allowed. Each has tentative plans to offer 10,000 bikes, and there are two more vendors in the offing, ofo and Vbikes. Unlike Uber, the bikes are downright cheap for daily use, at a dollar per ride or $29 per month.

Already, the private bikeshares in their first week have topped their failed government counterpart. Limebike reports that in its first week with 500 bikes, there were 10,000 rides, or about 3 per bike. With 20,000 such bikes in the city at 3 rides per day, Seattle would have about 22 million rides a year – as much as all American bikeshares had in 2015!

Admittedly, many of these early rides were free, to promote the service – but such ridership levels are hardly unprecedented. For comparison, New York’s Citibike, a dock-based station, currently racks up about 3 rides per bike per day in cold January, and 7 in June.

(Citibike / wikimedia)

Perhaps the greatest virtue of these systems is their flexibility: shortly after users took issue with Spin’s limited gearing, given Seattle’s hills, Spin announced that within a month, all of its Seattle bikes would be upgraded.

At a time when China has often been mistakenly dismissed as a nation of copycats and cheap workers, dockless bikeshares are a prime showcase for Chinese innovation. There, the bikes now see as many as 50 million rides per day – that’s equivalent to 12 million rides a day in the US, while China’s Uber, Didi Chuxing, sees an average of 20 million rides per day. And the bikeshares are growing faster. Two of the biggest players, ofo and Mobike, have billions of dollars in venture capital backing them – which is helpful for a business where large upfront capital investments are made, and then paid off over the course of a couple years’ worth of fares. Even Rihanna has lent a little starpower to the effort.

The Opposition… from Urbanists?

Suspiciously, many urbanists and planners have spoken of dockless bikeshare in accusatory tones. Detractors have dredged up images of abandoned, broken, and ill-placed bikes. With single rides costing a dollar or less, private bikeshares could take away municipal bikeshare’s most profitable customers, temporary pass holders.

Undoubtedly, dockless bikeshares, “rogue” or not, will have growing pains. Parking tickets and impounding may prove to be needed punishments for scofflaws. City officials may have to convert some car parking into space for bikes, and possibly charge the bikeshares accordingly.

The planners’ concern (…trolling?) about the viability of someone else’s investments is fruitless and perplexing – especially given the tenuous and subsidized finances of city bikeshares. If municipal bikeshares were as excellent as Paris’ Velib, the planners might have a point – but Velib has had an annual subsidy of $18 million, or $60 per subscriber, an amount U.S. cities simply won’t provide. And that’s in a place with countless visitors year round, paying for costlier temporary passes. The bureaucrat’s aversion to anything “not invented here” will give way to tolerance and acceptance.

As someone who bikes, having billion dollar companies staking their fate on city cycling is reassuring, not scary. Alarm about for-profit bicycles “taking over” cities is comical, given the vast urban property already given to cars.

The Bicycle Battle Royale

With municipal bikeshare, a for-profit company is responsible for managing operations for a single system. Without continual direct competition, the pressure to keep costs down is minimal.

When multiple vendors compete daily for riders, pricing pressure is acute – and innovation is the result. Dockless companies are experimenting with crediting users to rebalance bikes, to reduce the workload for costlier paid staff. Partnerships and promotions will flower, subsidizing rides, just as Hulu and Citibank have done with municipal systems in Santa Monica and New York.

If dock-based systems falter, the stations could be repurposed for electric bikes, to court people who wouldn’t use a mechanical bike for a given trip. Alternatively, dockless systems could offer ebikes and incentivize users to charge them overnight, as some carshares do for gas.

Among everyday citizens in Seattle, the people who likes bikes are more than grateful for the thousands of lime and orange bikes entering the Emerald City. Already, cyclists are asking Seattle to relax the initial cap on the number of bikes allowed. Dockless systems are now available in Dallas, South Lake Tahoe, South San Francisco, and various campuses.

Uber and Lyft have been the biggest change to city streets in the last decade. But their impact on routine travel has been limited for most people, because they cost too much. Dockless bikeshare doesn’t have that problem, or the need for months of planning and building that dock-based bikeshares do. The technology stands to be the most sweeping change to American cities for the next couple years. As dockless offerings prosper, expect planners to belatedly follow the people and embrace change.