Why China's bicycle 'unicorns' deserted millions of bikes on the streets

Bike-sharing start-ups brought prosperity to Wangqingtuo. Now residents are dealing with the mess they left behind.

This farm grows bikes, by the looks of it. Hundreds of blue and mint-green bicycles stand in rows on this field in Wangqingtuo, the small community that calls itself “bicycle town.” Only the occasional caretaker and a pen of bleating goats watch over them as they rust.

Just a year ago, global investors were throwing money at Chinese companies that rented those bicycles to consumers. Bicycle start-ups became “unicorns,” or new companies worth more than $1 billion. This town, home to factories that made many of the bikes, prospered.

Now the boom has become China’s latest investment bust. Too many bikes litter the streets of Chinese cities. Some start-ups hit financial trouble. Wangqingtuo now has closed factories, a work force that’s leaving and too many bikes.

“They came very quickly,” Ye Rongqing, who runs a business in town painting bicycle frames, said of the start-ups, “and they left very quickly.”

Booms and busts punctuate the Chinese internet scene in a way that even Silicon Valley would see as extreme. From shopping to ride sharing to bike sharing and even truck sharing, deep-pocketed investors have turned new businesses into billion-dollar companies in a matter of months. Last year, China minted a new unicorn roughly every four days, according to Hurun, a research firm in Shanghai. 

“You had investors that were after the next big thing or afraid of missing it,” said Dan Wang, an analyst at Gavekal Dragonomics, a research firm.

Then many collapsed. While thriving new industries are created and many investors profit, the flameouts still take a toll. Small investors and suppliers can be wiped out. Customers lose money or start paying higher prices. Workers lose jobs.

Bike-sharing swept through Chinese cities over three short years, giving millions of commuters a way to get from the subway stop to the office. Today there are more than 23 million of these bikes on the streets of major Chinese cities like Beijing and Shanghai, according to the firm iiMedia Research.

Unlike bikes with sharing services in New York and other places, Chinese bikes didn’t need to be parked in a dock. Instead, each bike had its own lock that could be unfastened with a smartphone app. Politicians trying to tackle nasty pollution and urban congestion problems found them especially appealing.

Billions of dollars in venture capital money flooded in, creating opportunities for other entrepreneurs to copy. Soon there were too many bikes. Instead of consolidating, more start-ups cropped up. The start-ups, focused on growth, charged riders little or nothing. Mobike, one of the companies, still charges around 20 cents for a 30-minute ride.

“Even the companies that grew so big still haven’t figured out how to make money,” said Fu Yifu, a researcher with Suning Financial Research Institute, an organization attached to a Chinese internet finance company.

Bikes in every color of the rainbow were made in Wangqingtuo and shipped to cities near and far. Yellow bikes became synonymous with Ofo, orange bikes with Mobike, blue with Bluegogo.

Wangqingtuo, which began putting together two-wheeled rides in the 1970s, became a bicycle hub during China’s economic rise, the way other places became centers for making lighters or zippers. A sign at the town entrance proclaims, “China’s bicycle industrial base: Wangqingtuo welcomes you.” It suffered as increasingly affluent Chinese turned to cars and scooters, and it turned to making bicycles for other countries.

Then the bike-sharing boom hit. The Shanghai Phoenix Bicycle factory in town took on so many orders for Ofo’s bright yellow and black bikes that by 2017 it was churning out 10,000 bikes a day, according to Gao Yuntian, an employee from Shanghai. Most, he said, were for Ofo.

Then money slowed.

Ofo “had ordered so much that they started to have problems with a cash squeeze,” Mr. Gao said. “Then they paid us less and less.”

Ofo, which has faced a flood of demands from customers who want their deposits back, says it has been hit by industrywide problems. “Under such circumstances, Ofo is one of the few companies in the industry that still strives to survive on its own,” Scarlett Zhao, a spokeswoman for Ofo, wrote in an email.

Fan Duan, who moved to Wangqingtuo in 2014 to lead the sales department of a bike company, had his own run-in with Ofo. Leigesasi, Mr. Fan’s company, began making Ofo bikes in early 2016. But soon Ofo got big and wanted more.

“They started to demand deliver first and pay later. We stopped manufacturing for Ofo,” Mr. Fan said.

By 2017, things started to go wrong. Factories were making so many bikes that there was a surplus. Some start-ups could no longer pay for their orders.

Bluegogo, China’s third-largest bike-share company, went bankrupt in November 2017. A year later, Ofo suddenly faced mounting financial pressures. Its founder was placed on a government blacklist for a growing pile of unpaid bills. Riders lined up to collect their $15 to $30 in deposits each.

Ofo will “be responsible to our users and responsible for every debt,” Ms. Zhao wrote.

Many factories in Wangqingtuo were forced to sell their bikes at big discounts, according to Mr. Ye, who runs the frame-painting business. It set off a domino effect. Bike suppliers tried to sell unwanted orders of bicycles, finding limited success because the specifications were often particular to a company’s design.

From there, the town’s bike factories had little chance of recovering. “To put it in one sentence,” said Zhang Yi, chief analyst at iiMedia Research, “it really messed up the bike factories.”

Today, parts of Wangqingtuo look like a ghost town. Many factories are locked tight, and the signs that once showed their names and specialties have been removed. Storefronts stand empty on the street where many of the bike factories used to run shops. A stack of bicycle wheels sits beside a storefront. Nearby, someone has piled unwanted bicycle forks in a haphazard row.

“I am going back home for Chinese New Year,” read a sign written on the metal garage door of one empty factory. “Will restart on the 18th of Chinese New Year,” it said, referring to Feb. 22. More than a month later, the person had yet to return.

The bicycle manufacturer Tianjin Fuji-ta Group managed to stay in business. When its factory started working with bike-sharing start-ups like Ofo and Hello Bike in late 2016, it took around 400,000 orders. The next year, that number jumped to eight million.

The orders have since halved again, but Fuji-ta is still working with start-ups that survived the industry culling.

Some in town are still looking for the silver lining. In recent months, Mobike and Bluegogo, which Didi took over last year, have raised prices.

“This is in order to go back to market prices,” said Mr. Zhang, who believes that this could mean “a second spring” for sharing bikes.

Fang Hui, a 25-year-old from Wangqingtuo who makes bikes and sells them online, recently bought hundreds of yellow Ofo bike frames. On a recent visit, they were stacked in a pile on the floor of his makeshift factory. He paid just over $2 for each one, and he said he planned to find a way to put them to use.

Mr. Fang recalled how much his hometown had changed in the past few years. During the boom, delivery trucks caused daily traffic jams, he said, and factories couldn’t get enough workers.

“Before, there were many people coming from outside this town to work here,” Mr. Fang said, adding, “We seldom see anyone from outside anymore.”