Dockless Bike Hire Schemes Fading Away, and TfL Scheme Economics

Cycle - Ofo.jpgDockless bike hire is where cycles can be picked up, used and then discarded anywhere on the streets of a city, for a small fee. That contrasts with the TfL/Santander bike hire scheme in London where you can only retrieve and return bikes from docking stations. Dockless bike hire has taken off in some cities across the world, and a number of operators launched such schemes in London.

The Guardian ran an interesting article recently on the success, or otherwise, of such schemes in the UK under the heading “Life cycle: is it the end for Britain’s dockless bike schemes? See: http://tinyurl.com/y37ugqc3

Many operators who launched in the UK have found to their cost that there are high levels of theft and vandalism of bikes. In addition, many local councils (i.e. boroughs in London) have opposed their introduction because it means that bikes get abandoned on streets, often causing obstruction. Some boroughs have taken to removing bikes unless the operator is approved, although technically they do not have to be licensed as yet. This means that as some boroughs have approved operators but others not, bikes cannot be ridden across borough boundaries without the risk of seizure.

Failures include oBike who put 1,330 bikes in London in July 2017 and withdrew them four months later. Wandsworth impounded many of them as they appeared without warning they claimed. Ofo, a very large Chinese company, launched in London but is now withdrawing altogether from the UK.

Comment: Clearly an example of a “good idea” which ignored the amount of criminal activity and general vandalism in some parts of London. An example of an unproven business model which has yet to demonstrate it can be run as a viable economic business.

But is the TfL “docked” scheme economic? The answer is no. It lost £3.7 million in 2017/18 even after the sponsorship income of £6.3 million from Santander. So losses are about equal to the fare income in reality. Or to put it another way, the fares paid by users cover less than half the operating costs. That year was similar to the previous year and the one before that was even worse. Clearly a totally uneconomic solution for the transport needs of London users, heavily subsidised by other TfL income (which is mainly bus/tube fares and taxes) and by Santander.

You can see more detail on the economics of the TfL scheme here: http://tinyurl.com/y44cyebj

This was another “good idea” introduced by cycling fanatic Boris Johnson pandering to the cycling fraternity, just like all the very expensive cycle lanes built in London in recent years. The result is enormous expenditure to no good purpose and it is financially unjustifiable. But recent Mayors of London have tended not to be hot on financial management as Sadiq Khan has shown repeatedly with TfL running up large deficits while Boris Johnson wasted £43 million of public money on the “Garden Bridge” before it was recently abandoned altogether. Politicians are good at spending your money, and politicking it seems to pander to the whims of the electorate, but not at managing budgets and staying within their income. That’s one reason why Mr Khan is so keen to raise taxes via the ULEZ scheme.

Roger Lawson