That China’s burgeoning tech industry harks back to America’s dot-com maelstrom of the 2000s is a point that is hard to disregard. Companies emerge and vanish in a flash, all of them eyeing sweet spots alongside recent mega-stars like Didi, Meituan-Dianping or Bytedance. VCs are wary, they have burned their fingers more than once trying to fish out the next big thing from this seething stew of global ambition and massive capital.

One sore that has not healed is bike-sharing. Dubbed one of China’s New Four Great Inventions it turned out all but a disappointment in just two years after the industry pioneer ofo took its operations outside university campuses and flooded China’s streets with flashy yellow two-wheelers. You might be familiar with this flawed scenario if you have been following the ups and downs of the American dockless scooter companies. However, when it seemed like we were about to hear the eulogy to the troubled industry, Meituan-Dianping and Didi Chuxing – companies that timely bought into enfeebled bike-sharing flag-bearers Mobike and Bluegogo – suddenly started revitalizing their bicycle fleets.

Beijing’s bike-sharing palette is very different today compared to what it looked like just a year ago. Meituan snatched the color yellow from the virtually defunct ofo in an attempt to repaint the gray and orange Mobike and harmonize it with the rest of the company’s branding. Didi is gradually replacing the old navy-blue Bluegogo bikes with its own brand of white and turquoise two-wheelers named Qingju (Green Orange in English), while the Alibaba-backed white and blue Hellobike is pushing for dominance outside the tier one cities.

In late August, the Beijing Transportation Committee released a message saying that Didi and Meituan were planning to reduce the number of bikes on the streets, and to replace them with their new rebranded versions. Didi decided to replace 250, 000 of their old bicycles while also cutting their number by half. The first batch of 150,000 blue bicycles is already being recycled and substituted by 75,000 new turquoise ones. Meituan-Dianping have committed to similar changes while also reportedly abandoning the semi-autonomous Mobike brand and incorporating it more deeply into the mother company’s core business under a new name Meituan Yellow.

In late 2017, ofo had 23 million bicycles in China and Mobike was catching up. Experts warned these companies of the necessity to downsize to turn a profit, but instead only saw more bikes appear on the streets. Desperate to seize the market, start-ups (especially ofo) were burning through cash and not earning anything in return. By December, this ill dynamic started bothering not only industry pundits but customers as well. Worried that the companies might go bankrupt, users rushed to withdraw their $30 deposits.

While on paper the deposits were collected as a security against damaged bikes, in reality they served a different purpose. It is likely that the companies were reinvesting the money or using it to fund their operations, which was something out of a legal gray area. Naturally, the wave of deposit withdrawals threw the start-ups into a frenzy. Mobike swiftly sold out to Meituan-Diaping in a $2.5 billion deal, while ofo stood its ground and failed, heralding a massive capital reshuffle.

A pile of ofo bikes in Beijing

The new industry patrons took a more thoughtful approach to the business, incorporating bike-sharing into their growing ecosystems, reconsidering the pricing strategies and, most importantly, the purpose of cramming the streets with flocks of two-wheelers.

“If an industry has very limited profit-making channels, even those who can survive may not be able to operate independently. Individual platforms have to merge in order to build an ecosystem that can expand their profits,” said Professor Timon Du of the Chinese University of Hong Kong (CUHK) Business School.

Bike-sharing’s profit-making channels were extremely limited. Per-ride charges were not doing much for the companies’ bank statements, given the costs of producing millions of bikes and the discounted ride fairs. ofo tried to tackle the problem by leasing their bikes to advertisers, but it did not help unfortunately.

In order to make bike-sharing worthwhile Meituan, Didi and Alibaba doubled the prices from 0.5 to 1 yuan per 15 min and are now cutting down the supply to make sure that each bike runs through enough rides a day to pay for itself in the mid-term perspective.

Apart from that the new vertical dominators have more sophisticated agendas. For the Hong-Kong-listed Meituan-Dianping, Mobike is an important element of the local ecosystem. For a company whose main business hinges on recommendations and delivery, knowing where their users go is vital. Besides, last October the company started a new unit for “location-based services” that include ride-hailing, biking, autonomous driving and other transportation means. The data collected through these operations could allow them to track users’ movements to provide them with more accurate and enticing automated suggestions.

For Didi, bicycles solving the “last-mile” problem are part of a clear attempt to dominate China’s mobility industry and become the all-in-one solution for multimodal transportation. The company already dominates China’s ride-hailing market and excels in autonomous driving. Now it’s aspiring to own the short-distance travel segment, too.

Finally, Alibaba’s bet on Hellobike is in unison with the firm’s efforts to make Alipay the country’s number one digital payment service. As a high-frequency product, bicycles can attract new users and traffic to Alipay (hence the accent on lower tier cities with more room for growth), while also supplying the app’s Sesame Credit service with new usage scenarios, allowing it to more precisely assess users’ credibility.

The bike-sharing industry has been on a roller-coaster ride for the past several years, but is now showing inconspicuous signs of finally coming into its own at the hands of bigger and more experienced backers. Meituan, Didi and Alibaba learned from their predecessors’ mistakes and proved to be shrewder and more farseeing in their strategies. It is still unclear if the bikes will pay off their production costs through rides alone. However, there is hope that the companies’ focus on ecosystem building will make them worth the investment.