After the barbaric expansion, the shared bicycle industry ushered in a big contraction

- Aug 09, 2018-

After the barbaric expansion, the shared bicycle industry ushered in a big contraction


According to the British "Financial Times" report, the Asian sharing bicycle industry is experiencing a significant contraction, the smaller platform has been squeezed out of the bureau, and some of the largest platforms have also slowed the pace of rapid expansion overseas.

The startup ofo, which was invested by Alibaba, announced this month that it will end its six-month business in India within two months, while withdrawing from Sydney and Adelaide, two cities in Australia.

In addition, according to China's Caixin magazine, due to financial constraints, ofo plans to “slim down” Asian businesses outside China, focusing on four regions: Japan, South Korea, Singapore and Hong Kong.

This retreat marked a sudden reversal of Ofo's expansion plan, which was originally planned to launch 20 million bicycles in 20 countries by the end of 2017. “At the moment we focus on our key markets and achieve profitability,” ofo said in a statement, “We are communicating with our local market about our plans.”

According to research firm IDC, in the past two years, the sharing bicycle industry in the Asia-Pacific region has enjoyed the benefits of a large influx of investment, which has enabled about 60 platforms to expand the number of bicycles and compete to provide users with greater subsidies. China's two largest shared bicycle platforms, Mobike and ofo, raised nearly $2 billion in funding in 2017 alone.

The sharp expansion of shared bicycles is most evident in China – in the heyday of shared bicycles in China, rows of colorful bicycles have severely occupied a limited space on the sidewalk. However, in recent months, due to fierce competition and serious bicycle theft, smaller start-ups have quickly been exhausted and many platforms have closed down, which has led to a significant reduction in the number of street-sharing bicycles.

Lin Biao, an assistant professor at CEIBS in Shanghai, said, “Their goal is to pursue growth and present investors with the growth stories they want, but we quickly discovered problems with their overseas expansion.”

According to Quartz, ofo is also reported to be laying off workers in North America. The report said employees were told that ofo is "going into sleep mode" in the US and Canada.

Earlier in July, Hong Kong startup GoBee went bankrupt because of losses. After the company entered Europe for 4 months, 60% of the bicycles were damaged or stolen, and the European expansion failed. The Chinese startup, Bluegogo, which used to have 20 million users, became one of the first large-scale platforms to close down in November last year.

The surviving platform maintains operations by seeking the support of Chinese technology giants. In April, ofo's main rival, Mobai, was fully acquired by Meituan Dianping, a catering service giant, for a total price of $3.7 billion (including debt). Using part of the proceeds, Moby returned a $150 million deposit to the user in an effort to gain an edge over the competition.

Moby said that the goal is to make the “free deposit” the standard for the shared bicycle industry. This will actually increase the operating costs of competitors and push other players out of the market.

The cycle of shared bicycles is exactly the same as the money-burning battle between Chinese car service giant Didi and Uber, the latter two competing for market share by subsidizing users.

Of course, (shared bicycle companies) are too dependent on external investment and user subsidies,” Lin said. “They never have a sustainable business model, but blind expansion.”