Velib’s Bicycle Sharing Program

By Hai

I think the program has a bright future because it addresses a mega trend in the world. Bicycle sharing is the solution for congestion, pollution, and high density transportation. In fact, bicycle sharing is one of the most important components in the entire transportation system. In the foreseeable future, the more cities we have in the world, the more bicycle sharing systems we need. That is why I think bicycle sharing will be a huge market in the future. Further, the Velib program provides a very efficient solution to the municipal authorities, because they provide the entire bicycle sharing system and the government does not need to draw on any taxpayer’s money for this and eventually, the program makes money for the city.

However, I think there are still three issues here that potentially will be unclear in future.

Firstly, even though the city does not need to pay any money for the bicycle sharing system, the truth is that the municipal authorities are exchanging billboard royalties for the set-up of the bicycle sharing system. That means in future, if it is necessary, the authorities can exchange other forms of royalties for their bicycle sharing system. The industry is controlled by the government’s decision as to which royalties it wants to use in the exchange.

Secondly, JCD is an outdoor advertising company, not a specialist in the bicycle-sharing field. To run this business well, they need to acquire expert specialists in this field, strengthening the management and making it more sustainable.

Thirdly, according to the two issues above, in order to make this business sustainable, JCD needs to figure out how to make the bicycle sharing system self-sufficient, running on its own without any subsidies or compensation.

There are several methods JCD may consider for the future.

· The first consideration is scale. On a bigger scale, average costs will lower, and the bicycles and stations will be cheaper and more cost-effective. Thinking on a global scale, rather than focusing on a single city, can help balance out the profit margins and allow the system to be self-sufficient.

· The second consideration is that JCD may need to set up a subsidiary to focus on innovation in bicycle sharing technology, using technology to lower the costs.

· The third consideration is to make the revenue scheme more dynamic, incorporating more diversity. For example, JCD could add physical support to some bicycles, then price the two different kinds of bicycles differently.

· The fourth method is to take more advantage of the incentives and penalties policy, letting the users take part in the management of the program, rather than simply being renters. For example, rather than just giving users the option of adding fifteen minutes to park their bicycles at less-trafficked stations in the “V+” scheme, users could get a reduction in price as well, which is an added incentive that will not cost JCD further if it is below 1.5 euros while reducing movement fees. JCD could even set up an Internet system to alert a user as to which station is his best option for parking.

With all these innovations, the bicycle sharing system can one day reach a balance between input and output, becoming self-sufficient and sustainable.

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About macomberjohnd

HBS Finance faculty interested in sustainability in the built environment including devices, structures, townships, and cities.

One Response to “Velib’s Bicycle Sharing Program”

  1. I completely agree with the notion that bicycle usage can help with pollution and congestion in major cities. From my experience in Boston and NYC, I see that a lot of people use the resources in their normal lives. These are people who were probably considering buying a car or using the public transit system.

    However, this program is probably adding more cost to the city.

    To make the program successful, the city has allocated public space to allow JCD to make advertising revenue. This added advertising has an opportunity cost and is added noise to the residents of the city. For neighborhoods who try to control the noise, the city imposes this on them.
    Another aspect I would like to dig deeper into is the additional investment into the infrastructure that cities need to make to make the program better. For example, added bicycle lanes, painted lanes, wider roads, lights, stops, education of pedestrians, education of drivers, electricity to sites, added lighting around stations, safety concerns, etc. Also, public transit suffers from less fares collected.

    The last externality I would like to point at is the impact the bikers have on car traffic. An added lane reduces car lane width, emergency shoulder space, causes uncertainty among drivers, causes further accidents, etc. Bikers usually cause drivers to be more nervous on the road because bikers are more unpredictable than drivers. Some follow traffic signals and some don’t. In NYC, almost all taxis have a sticker in the backseat that trains customers to watch out for cyclers when opening doors. Who paid for that?

    All in all, it’s my opinion that cyclers reduce drivers on the road and pollution. I wonder what other costs are also absorbe by cities that taxpayers eventually pay for? This is a strange “public good” since everyone pays for it through taxes, the companies running it don’t make money, and there is a very small segment of the city that actually needs/wants bike sharing programs (very small).

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