China's bike-sharing bubble finally bursts

Ofo bikes on streets Photo: Baidu

China's bike-sharing bubble has finally burst with the companies in the sector facing financial difficulties or going bankrupt.

Hundreds of frustrated users lined up outside ofo's Beijing headquarters to demand an immediate refund of their deposits on Monday, financial magazine Caixin reported. Even local police arrived at the site to maintain order.

The customers must pay up to 99 yuan ($14.30) or 199 yuan to register on the platform before using the company's bikes.

They can request a deposit refund anytime, but doing so via the company's app meant that there is a maximum wait of 15 days after applying, according to ofo regulations.

However, many ofo users across the country complained that they had failed to get their deposits back even after the waiting period.

"I asked for a refund over a month ago and hundreds of my phone calls to the ofo service hotline went unanswered," said a college student surnamed Qiu.

Qiu, 25, said that the main reason he does not want to use ofo bikes any more is the poor user experience as the bikes have not received proper maintenance.

It is estimated that over 10 million ofo users have applied for deposit refund on ofo app, meaning that the company would have to pay back at least 1 billion yuan, reported the state-backed China News Service.

Caixin said that ofo users did not immediately get their money back that day, but were asked to provide their personal information, including bank account, with the promise that they would be paid back within three days.

That is a colossal sum of money, making many customers doubt whether ofo has the ability to make the refund.

Ofo is one of the two biggest bike-sharing companies in China, the other being Mobike, which was merged by the country's leading online and on-demand delivery platform Meituan Dianping last year.

Their rise is part the emergence of sharing economy in China over the past few years.

To occupy the market, bike-sharing companies invested millions of yuan on the production of bikes.

Due to the lack of proper management systems, the platforms suffered severe financial losses this year.

Ofo is said to be heavily indebted to the tune of over 6.5 billion yuan, which led to several lawsuits against it.

Dai Wei, founder and CEO of ofo, once admitted in an internal meeting that he had made some wrong decisions, but denied that his company would go bankrupt.

Other platforms like Mobike, Bluegogo, Wukong Bikes, and 3VBike have already announced acquisition and reorganization, or bankruptcy.

As people's enthusiasm for shared bikes significantly decreases, the industry's revenues fall, according to the Paper.

The People's Daily, the mouthpiece of the Communist Party of China, said earlier this year that the country's bike-sharing industry is "immature and unreasonable" because thousands of abandoned bikes have been seen in city streets and rivers.

"Three years ago, lots of people were happy about the convenience bike-sharing brought. Nowadays, abandoned bikes have become mountains of rubbish," said the commentary.

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