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Sharing Economy

Alibaba-backed Ofo shrinks overseas bike-sharing

Shuts down India, Australia and Israel to focus on profitable cities

Ofo bicycles near a subway station in Wuhan, China    © AP

NEW DELHI/MELBOURNE, Australia -- Ofo, which has flooded city streets across China and around the world with discount bicycle rentals, is giving up on India, Australia and several other markets.

The Chinese company, which counts Alibaba Group Holding as a key investor, said it would wind up operations in Australia and India, within two months. In the past few days, the company has also announced its pull out from Israel and cities including Chicago in the U.S. and Sheffield in the U.K.

The retrenchment comes amid a wider shake out in Asian bike sharing where most operators accumulated losses while trying to grab market share with cheap rentals.

Gobee, a local Hong Kong operator which launched last year, went into liquidation on Tuesday.

"Our decision is purely due to our financial situation," Chief Executive Raphael Cohen said in statement on Facebook. "After over a year in service, we unfortunately have not been able to make the service profitable, and the financial costs of maintaining the bikes in their best condition has proven to be too high for us to sustain the business."

OBike, a Singaporean operator founded by Chinese investors, shut down two weeks ago in the city-state, citing tightening regulations which will raise fines for companies that fail to ensure bikes are parked in designated areas. It also pulled out of Melbourne, Australia.

Ofo, formally known as Beijing Bikelock Technology, has raised $2.2 billion from venture investors, according to the Crunchbase funding database. According to Chinese media reports this week, company officials have said they will put their international focus on Singapore, the U.S. and France.

Ofo only entered India in January, but had built up a network of 5,000 bikes in seven city markets.

"Some markets are at an advanced stage of profitability and Ofo just wants to focus on those," Rajarshi Sahai, who was director of public policy and communications for Ofo in India, told the Nikkei Asian Review. "This [shutdown] has nothing to do with the India team's performance or India's potential as a market."

"It's a survival tactic," he added. "Start-ups are like this. I hope this will help Ofo survive and grow and it can then come back to this market."

While Ofo is retreating from India, local rival Mobycy is currently raising $2 million in financing, which it aims to complete by month's end. Mobycy has about 2,000 bikes in India.

As in Singapore, the haphazard parking of bikes has been a major problem in Australian cities and several local governments have imposed fines on bike-share companies to combat the problem. Ofo had focused its operations on Sydney and Adelaide.

"We encouraged the use of share bikes, but it was clear that these companies were taking us for a ride," John Wakefield, mayor of Waverley, a Sydney suburb, told the Nikkei.

"I believed very early in the process with these share bike operators that they were simply flooding the market with bikes, with deposit-free periods and free rides just to get rid of competitors," Wakefield said. "There were bikes everywhere, lying on the ground in clusters."

Chicago has taken on the problem of bike-filled sidewalks with a pilot program requiring that share bikes be equipped for locking to a bike rack or other fixed object. Ofo bikes are "dockless," with their wheels locking up by themselves wherever they are parked.

Retreating bike-share operators have repeatedly caused customer upset by shutting down without returning customer deposits. Ofo implied it would address this at least in Australia, saying in a statement that it "will act responsibly in each market as it winds down operations." Gobee promised to fully refund deposits for those filing requests within a month.

Mobike, Ofo's main Chinese rival, announced last week that it would no longer hold deposits from customers in China.

Additional reporting by Nikkei Asian Review Deputy Editor Zach Coleman

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