A Gas Pump for 300 Million Phones
In the world's largest market for mobile devices, a clever startup is solving China's personal energy shortage.
By Ting Shi

(Business 2.0) – Over the course of just a few years, the machines have invaded cities and towns throughout China. They're found in airports, rail stations, and banks. They also turn up in tourist hotels, museums, conference facilities, restaurants, shopping malls, and nightclubs. And much of the time, they're surrounded by cell-phone-wielding Chinese. The attraction is energy--more specifically, a recharge. Shaped like overgrown mobile phones, the distinctive kiosks, called shouji jiayouzhan, or "cell-phone gas stations," provide a quick and convenient way to rejuvenate tired batteries while also creating new opportunities for Chinese entrepreneurs.

"Cell phones need to be fed, but some people can't remember to do it," says Lu Shiguang, general manager of Chaliyuan, the Beijing-based company that has manufactured 75 percent of the estimated 65,000 cell-phone gas stations scattered throughout China. "As recharging machines become ubiquitous, they don't have to."

Equipped with as many as 24 plug-in cords to accommodate most popular cell phones--as well as many digital cameras, PDAs, and laptops--Chaliyuan's machines charge 1 yuan, or about 12 cents, for a 10-minute recharging session that typically provides eight hours of talk time. And there's certainly no shortage of phones in need of a jump start: With roughly 340 million mobiles in use throughout China--nearly twice as many as in the United States--the industry still has room to grow. Currently, mobile users account for just 25 percent of China's population, a penetration rate lagging behind those in the United States (61 percent) and Europe (65 percent).

Founded by young entrepreneurs in 2000, Chaliyuan released its first products in mid-2002. Early entry to the market helped, but specialization has been the key to success: Most of Chaliyuan's competitors are electronics manufacturers that treat recharging as a side business. While declining to provide details, Lu says Chaliyuan, with 70 employees, is profitable.

Typically costing around 2,000 yuan, an average kiosk collects about 50 yuan per day. Revenue is divided between Chaliyuan's authorized sales agent and the local host, with each machine returning roughly 15,000 yuan a year to its host--not bad in a country where the average annual income is just 9,100 yuan.

Meanwhile, the video screens on all Chaliyuan machines can also display ads. "While you recharge, there's nothing else to do but stare at the screen," Lu says. The kiosks offer a cheap way for advertisers to reach potential customers, and Chaliyuan earns an undisclosed percentage of all ad revenue.

Unique features make Chaliyuan's machines especially attractive. Some can release residual electricity to improve battery life. After the 2003 SARS epidemic, the company came out with kiosks that kill bacteria on phone casings. Chaliyuan's newest machine, introduced in May, features an air-purification system that can be marketed as a small oxygen bar. For chatty Chinese desperate for a recharge, that'll be another reason to breathe easier. -- TING SHI