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Bike sharing seems to have originated in China.

And it has spread to the UK.

And at least a decade on it continues to spread into the provinces.

So it has longevity.

So what are the economics of this industry?

At first glance it would appear to be a horrible model: lots of liability, lots of maintenance, lots of criminality and endless opportunity for annoyance through dumped bikes causing inconvenience.

So what is the economic model of bike sharing?

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    $\begingroup$ "as far as I can tell the economics there involves state involvement" - I don't think this is true. $\endgroup$ – Kenny LJ Jun 18 at 12:20
  • $\begingroup$ I have updated the question. $\endgroup$ – Ben Jun 18 at 12:42
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    $\begingroup$ "at least a decade on it continues to spread into the provinces. So it has longevity." If you're referring to dockless bike sharing in China, then "at least a decade" isn't correct. For example, the two biggest companies (ofo and Mobike) were founded in 2014 and 2015. Also, both have been experiencing severe financial difficulties for quite some time now. $\endgroup$ – Kenny LJ Jun 19 at 8:26
  • $\begingroup$ I do not think that this business model is very profitable as many such companies went bankrupt or left the market - at least in the European cities that I know. I don't believe in the interest story told in the first answer as many companies let you register for free. I do know that the bikes collect data. However, I also don't believe that selling this data generates huge profits. $\endgroup$ – Bayesian Jun 19 at 14:24
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Interest is their profitability mechanism. Pretty much everything else is a cost.

Let's make an example:

  • I start a bike share business.
  • I buy 100 bikes. Costs me \$10K.
  • I make the fee of using the bikes so cheap, lots and lots of people have no problem using them as its so cheap.

Here is the catch: To cover my liability (lost bikes, stolen, wrecked, etc.) there is a one time fee (before you can use any of my bikes) that is a 100% REFUNDABLE security deposit of \$50 (you get your \$50 back whenever you want, so it's still cheap for you).

Everyone's \$50 adds up to quite a lot of money just sitting earning no money. But I want to make money. So what do I do? I invest it in super safe short/medium term bonds or whatever I want at a low/decent interest rate and collect my profit.

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    $\begingroup$ Can you back this up with references? $\endgroup$ – Giskard Jun 18 at 22:22
  • $\begingroup$ There is this great thing called google. I really don't think explaining a bike sharing model needs a reference. But here you go: citymetric.com/transport/… $\endgroup$ – Clinical_Coder Jun 19 at 13:06
  • $\begingroup$ (It's the very first or second link in a simple google search of "economics of bike sharing"...). $\endgroup$ – Clinical_Coder Jun 19 at 13:12
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    $\begingroup$ I hate it when instead of adding proper references people say stuff like "Google is your friend". So in the middle of the second article the interest on deposits part is indeed mentioned. This seems rather miniscule (hence my question), and is not backed up by any calculations. The numbers mentioned there seem to show that two trips generate roughly the same revenue as a 5% return on the deposit. $\endgroup$ – Giskard Jun 19 at 13:46
  • $\begingroup$ So in conclusion, by doing a simple google search, you found... a relatable reference to my answer. There are no calculations because it's not a hard math question or answer. The numbers depend on your specific business model. Not the economic theory of the model. $\endgroup$ – Clinical_Coder Jun 19 at 14:57

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