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Alternative Energies

84

OPEC Monthly Oil Market Report – August 2017

Alternative Energies

New technologies find niches

in urban transportation in China

As transportation in China’s main cities continues to be a logistical challenge, innovative business models

have availed themselves of a longstanding traditional Chinese vehicle – the bicycle. While other start-up

industries may find market conditions in the country challenging, smart bike sharing start-ups are expanding

rapidly and raising vast amounts of dollars in funding.

The concept is simple: prospective users download an app to their smartphones enabling them to locate and

unlock a nearby bike. This is one step beyond the already established concept of city bikes, where bicycles

are restricted to pick-up and drop-off at pre-designated docking stations. The low cost of this new smart bike

service – as little as 15 cents for 30 minutes use – adds further to its immense popularity. Furthermore, the

fact that the bicycles are equipped with solar panel-operated technology allows the companies to gain

valuable insights into the habits and preferences of their customers, which can be used further in terms of

marketing data.

Two of the largest companies offering smart bike sharing in China, Mobike and Ofo, currently claim over

100 million registered users each and operate in over 100 cities with a total fleet of more than 12 million

bikes. Company representatives believe there is still plenty of room for growth, adding that they should be

able to provide more than 100 million rides every day. This potential for expansion has also attracted

investors to the arena. Recent reports indicate that Mobike and Ofo have managed to raise some $1.3 billion

in additional funding to further expand their operations.

The mindset of younger generations may also contribute to the growth of the smart bike sharing model –

particularly given that the inclination of this population group is to delay investing in an automobile. In

addition, considering the characteristics of the potential customer of the smart bike concept – students and

young professionals, people keen on convenience, individuals eager to claim possession of new

technologies, and those mindful of the environment and not burdened by overhead costs – demand for the

service could see an increase.

But whether or not this would be at the expense of other fuel-based means of transportation is questionable

– especially given that the increased use of bikes poses its own set of problems. For example, issues related

to wilful damage and bikes left in inconvenient locations hindering the flow of urban traffic, rather than

alleviating congestion, have raised concerns in other countries and cities looking to emulate the concept.

Furthermore, considering weather conditions – which may not always be conducive to riding a bike – and the

limitations on the number of persons that can be transported, means that it has some very clear limitations

compared to the automobile.

Thus, despite the optimism of participants in this new market niche, the impact of the new trend on apparent

demand for transportation fuels remains very limited. Analysts predict that the use of shared bikes in China’s

big cities may replace between 10,000–30,000 tb/d of gasoline this year, in addition to the advancement of

other alternative fuelled and hybrid automobiles, which are expected to start to marginally impact product

demand from a short-term perspective. It should be noted that automobile sales in China remain steady and

healthy in all classes of conventional passenger cars, according to the China Association of Automobile

Manufacturers, with new energy vehicles making up just over 1% of total passenger car sales.

While the revival of the bicycle in China’s metropolises, particularly through new sharing models, has had no

visible impact on apparent gasoline demand, the success and potential of this new concept and technology,

coupled with a variety of other alternative fuel sources that are being developed to reduce the heavily smog-

burdened cities, may yet play a part in shaping the future of urban transportation alternatives.