Ofo, a Beijing-based bicycle sharing startup, announced Tuesday that it will pull out of Australia, just barely one year after its expansion into the region according to an Australia media report. It is looking to phase out its Australia operations, gradually shifting the bikes from the streets to the warehouse over the next 60 days.
In an official statement, Ofo spokesman says: ” The company made a strategic decision to focus on priority markets with an international perspective. It is not a rash decision and the Ofo Australia team will take responsibility and resolve all outstanding issues before terminating the operation.”
The call to exit Australia could, in part, be due to the fact that the dockless share-bike schemes might not work well in Australia, due to the uncontrollable issue of bikes clogging the Australian streets. Australian owned bike-share company Reddy Go also recently exited Sydney, joining Ofo.
Kim Doh, a senior analyst of Ibis World said: ” The bike-sharing business model had an issue from the start. Because these companies were unable to overcome the first economics of just supply and demand, it just ultimately to their downfall. ”
This news also came in the wake of a slew of negative reports about Ofo, the company that once boasted of serving up to 200 million users and operates in 20 countries, since the start of the year, when Ofo insiders revealed the cash flow woes of the company in January. Ofo’s bicycle orders have also declined dramatically from its peak by 60 percent.
As a matter of fact, with Meituan’s $2.7 b acquisition of archival Mobike in April hinting of a consolidation wave in China’s cash-burning bike sharing industry, investors have become increasingly skeptical of the loss-making Ofo. Interestingly, only about a month later, despite its predicament, the company actually rebuffed Didi’s acquisition offer – opting to fight the battle independently.
This exit from Australia and also Israel coincides timely with Ofo’s closure of its India operations today, just six months after its foray into India.
Perhaps this scaling back is to allow Ofo to concentrate on its core markets, mainly China where a majority of its users are based – is highly necessary with the recent rise of another bike sharing player Hellobike and a strongly-backed Mobike that had taken steps to take the competition to a new level with deposit-free services.