The sad cycle of Paris bike sharing

March 13, 2018

Two trends caught my attention on a recent return trip to Paris: cafés offering avocado toast, and shareable bikes scattering the pavement.

I’m a big fan of city bike sharing schemes for a variety of reasons: they sensitize drivers to cyclists; they reduce traffic congestion; they improve the urban atmosphere for cyclists and non-cyclists alike. With the launch of Vélib in the summer of 2007, Paris was one of the early leaders in the bike sharing movement and rose the become the largest urban bike-sharing program outside of China. I had even incorporated Vélib as a case study in the innovation course I was teaching at Sciences-Po.

The Vélib system certainly presented several drawbacks and experienced its own growing pains. Notably, Vélib’s docking station model involved several limitations. For instance, docking stations at downhill locations filled up quickly while the uphill stations tended to not be replenished when left to their own devices. So an elaborate system of tow trucks was put in place, optimized with algorithms, to transfer bikes at the end of the day from popular destination docking stations back to those primarily used as sourcing points.

Docking spots at full capacity frustrated arrived cyclists rushing to work, desperate to re-dock their bikes to stop the rental meter.

The primary limitation of the docking station model was its significant cost in infrastructure: the construction of the docking station, the opportunity cost arising from the displacement of the previous use of the particular patch of land, the maintenance of such infrastructure, etc. Because of this, the Vélib experiment only came to fruition thanks to a substantial expenditure of both taxpayer money and private funding in a public/private partnership between the City of Paris and private firm JC Decaux.

Despite its significant investment, it’s hard to argue that the Vélib scheme was not a success for many of the reasons I cited above.

Upon expiration of the 10-year contract with private sector partner JC Decaux, Paris City Hall reopened the public tender for the concession. Somehow, the well-positioned incumbent managed to annoy the City in its unwillingness to negotiate pricing. JC Decaux lost the renewal to a newly-formed consortium, comprising Montpellier startup Smoove along with enterprise specialists in parking (Indigo), maintenance (Mobivia), and mobility (Moventia). Dubbed Smoovengo, the consortium promised to install 600 docking stations by January 1, 2018 — with an ultimate goal of 1,400 docking stations, approximately 20,000 bikes, by March 31st. Moreover, they touted their bikes as more durable and with lower rental fees than their predecessor’s.

Regrettably, the January 1st deadline came and went without anywhere near the initial 600 stations operational. As of today, still fewer than 350 docking stations are working, vexing paying consumers who had purchased annual subscriptions. The new supplier had dramatically underestimated the challenges of deployment.

Enter the Chinese

Opportunistic bike sharing suppliers from China seized upon the chance to fill the void. Firms like Gobee.bike, Mobike, Ofo from China, as well as oBike from Singapore, flooded the city with a couple thousand bicycles and rapidly gained popularity. Better yet, the Asian schemes were dockless, offering convenience found lacking in the rigid Vélib and Smoovengo systems. Economies of scale from China and the absence of infrastructure costs allowed them to pass on the savings to consumers as well. An embarrassment to French innovation coming from the East.

Culture shock

The Asian bike sharing programs miscalculated in two areas, however. First, they underestimated the durability requirements necessary for Western cyclists. The Asian bikes worked perfectly for populations who rode them with care but proved too weak to handle the rigorous treatment (even abusive at times) of riders in France.

Secondly, the Asians underestimated the French cultural ingenuity in flouting rules. Since releasing a bike rental merely required checking out from the app, eliminating the need to return the bike to a docking station, devious consumers found a way to keep a bike for themselves without paying for it. They simply stashed their bikes in their buildings’ inner courtyards, common in Paris apartments, checking out of the rental while essentially locking the bike away from public use. With fewer bikes in circulation, the dockless bike sharing economics could not reach profitability. Already Gobee.bike has decided to retreat from the market. We’ll see if others follow.

Meanwhile, the City of Paris is levying penalties on the Smoovengo consortium for the delays, and the revised rollout date is promised for the end of April. What began as a poster child for innovation in public works is now merely spinning its wheels.

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posted in technology, venture capital by mark bivens

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