Uber – On China’s bike

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Jump removed from Lyft’s clutches.

• Uber has followed China’s lead and moved to consolidate bike sharing as another one of its shared transport related services but the continued existence of this service remains highly questionable.
• Chinese ride sharing companies Didi and Meituan are currently engaged in the same process to broaden the functionality of their services (see here).
• Jump is a bike sharing service like Mobike and Ofo which are very different to the municipality run bike sharing services run in a series of major cities worldwide.
• This is because Jump bicycles can be locked anywhere where it is legal to do so, meaning that the user does not have to find a docking station to collect or return his bicycle.
• This radically improves the user experience but also raises the issue of inventory management and logistics.
• Chinese cities have had huge problems with bikes being left all over the place creating both an eyesore and a safety hazard.
• Jump is different in that the bicycles have been designed to be heavy duty which is needed to withstand the harsh treatment that they are likely to receive.
• This combined with how Jump has implemented its hiring policies has convinced the San Francisco Municipal Transport Agency (SFMTA) to grant Jump a licence to operate.
• However, I think that this is still under test conditions as the SFMTA is using this launch as an 18-month test to work out the best way that this transport service can be offered.
• Hence, I suspect that Jump does face the risk of losing its license, but this is a risk that Uber seems to think is pretty low.
• Consequently, it is willing to pay somewhere between $100m – $200m to acquire Jump and to ensure that its bike sharing services remains an exclusive to Uber.
• I continue to think that the big challenge for Uber this year is to keep Lyft at bay.
• Uber’s Annus Horriblis in 2017, allowed Lyft to gain a lot of share and come within spitting distance of undermining Uber’s dominant position at home.
• This move is clearly aimed at keeping Uber’s service differentiated with a deeper suite of offerings right the way across multiple transportation services.
• This is very unlikely to have any short-term impact, as Jump has 250 bikes in San Francisco, but if it is successful, it could end up being a significant differentiator for Uber long-term.
• Uber must keep its market share above 60% at all costs because if it falls below this threshold, then it will no longer the dominant provider and its ability to crush competition will evaporate (see here).
• This needs to be priority No. 1 for Uber this year and the removal of Jump from Lyft’s clutches may go some way to ensuring that happens long-term.
• Uber is far from out of the woods yet.