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China’s third-largest bike sharing company closes amid financial trouble
 
Photo: Bluegogo
 
Bluegogo, China’s third-largest bike sharing company, has reportedly run into financial trouble with unpaid wages and users struggling to get deposits refunded, which analysts say marks a turning point in the country’s aggressively expanding bike sharing industry.
 
“As a CEO, I’ve made mistakes,” wrote Bluegogo chief executive Li Gang in an open letter on Thursday night. “I was filled with arrogance.”
 
Founded in 2016, the company has seen rapid expansion earlier this year. According to Crunchbase, Bluegogo has raised a total of 600 million yuan. Valued at 1 billion yuan at one point, the company is considered the third-largest bike-sharing company in China following Mobike and Ofo, with 700,000 bikes placed across China in the first half of this year.
 
Bluegogo tried to expand into San Francisco earlier this year, but was hindered by resistance from local politicians. A few months later, the company suspended its US experiment.
 
According to Technode, Li was also the first one to mention “bike innovation” from China in 2016 and was optimistic about Chinese bike-sharing industry’s global expansion.
 
China’s city streets are now packed with colourful shared bikes which are commonly hailed as the “Uber for bikes”. Unwanted sights of discarded bikes piled in street corners have become common sights in China.
 
It is reported that over 100 start-ups stepped into this industry over the past one year, aggressively raising money and producing GPS-enabled dockless shared bikes that can be unlocked using a smartphone app. Users pay a deposit fee of 99 to 299 yuan depending on the company and then are charged a fee of 0.5 yuan to 1 yuan for every 30-minute ride.
 
Similarly, Bluegogo required users to pay a deposit of 99 yuan, and charge 0.5 yuan per half hour of usage. The deposits are supposed to be fully refundable, but many users are now complaining that they have not received their deposits after they sent a refunding request, according to comments on Sina Weibo, China’s equivalent of Twitter.
 
Li said in the open letter that it had 20 million users across China at its height, which would mean the company at one point had 1.98 billion yuan in deposits, although it’s unclear how much the company is currently holding.
 
According to The Paper, the company’s Beijing headquarters have been vacated almost completely.
 
Another bike sharing company, Green Bike-Transit will take over Bluegogo’s operation, according to Li.
 
In the open letter, Li said the company’s problems began in June, “first, with an advertising incident that affected a large investment and possible acquisition.”
 
A company that supplies bikes to Bluegogo is reportedly still owed 10 million yuan, which said Bluegogo suspended orders in April, citing financial problems, according to the Global Times.
 
Previously, Hellobike and Youon bike merged to survive in China’s bike-sharing industry. Meanwhile, at least three other bike sharing companies including Wukong bike, Dingding Bike and 3Vbike have halted their operation, while Bluegogo is the largest one so far.
 
After the closure of Bluegogo, the industry is dominated by two players - Tencent-backed Mobike and Alibaba-backed Ofo, which are also expanding their business to foreign markets. This has also led many to wonder whether the two companies will end up emerging with each other to survive, like Didi and Kuaidi did, while for other small bike sharing companies, the best scenario appears to be purchased by either of the two giants. But some experts warn that a precondition for a merger should be complementarity between the two companies.
 
“But no matter looking at it from the perspective of the number of the bikes or technology, it appears not necessary for Mobike and Ofo to purchase another firm in the industry,” Wang Hui’e, an analyst from Analysys, told the China Times.
 
According to the Ministry of Transport, a total of 16 million new bikes from 70 bike sharing companies in China had been put on the streets by the end of July. Following that, several major cities including Beijing, Shanghai and Guangzhou, have told bike sharing companies to stop placing more bikes on their streets.
 
The Financial Times quoted Xue Yu, analyst at market research firm IDC, as saying that Bluegogo’s failure represents the funding bubble collapsing for bike sharing industry.
 
“I think a turning point for the bike sharing industry in China has arrived,” said Rui Meng, an expert from the China Europe International Business School, in a recent interview with Yicai.com. But he added that the future of the bike sharing industry in China would still be good considering the huge consumer demand and the government’s encouragement of green transportation amid ongoing environmental protection efforts.

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