Sharing economy – China bloodbath.

Didi in pole position but should not rush to IPO.

• The Mobike brand is about to disappear in yet another sign that while the sharing economy offers great deals to its users, earning a return from it is fiendishly difficult.
• This is a major global trend that I expect to play out with increasing volume during 2019 and uniquely leaves Didi Chuxing in pole position to dominate this segment in China.
• Mobike is about to be renamed Meituan Bike which will coincide with the disappearance of the stand-alone app meaning that bike renting will become just another part of the O2O (online to offline) ecosystem that Meituan is building.
• Meituan aims to integrate bike sharing into its other services such that it becomes just another option for users to get from point A to point B.
• The aim is to be able to offer an integrated solution where the system can intelligently suggest a journey that optimally combines public transport, biking, walking and ride-hailing.
• There are several other companies (Uber, HERE, Google etc.) also aiming to offer this but it is still very early days as gathering both the assets and having the intelligence to offer this is very difficult.
• Bike sharing in China has become a proxy war between Alibaba and Tencent as Tencent owns around 20% of Meituan and Ofo is backed by Alibaba.
• The bloodbath of 2018 forced Mobike into Meituan and I suspect that Ofo will also follow into Alibaba to become just another lynchpin in its growing ecosystem.
• Even being inside a giant company has not alleviated the cash drain being experienced by the bike sharing companies, which has led to Meituan halting any expansion plans for both bike sharing and ride-hailing given how brutal the competition is.
• This hands the opportunity to Didi Chuxing which is now un-opposed in ride-hailing which should provide a profitable base from which to expand into other areas of transport.
• Didi Chuxing has been expected to IPO early this year but news on this has gone very quiet as the IPO window looks like it is closing following the terrible performance of Meituan, Xiaomi and Razer to name but 3 high profile IPOs that have gone very badly in recent months.
• Didi would do well to wait until the dust from failing players in the O2O sharing economy settles.
• 2020 at the earliest makes more sense for Didi and I continue to believe that the same is true for both Uber and Lyft (see here).