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Ofo Quits India, Announces Exit From Australia and Israel

Jul 18, 2018 by Meeta Ramnani
Ofo Quits India, Announces Exit From Australia and Israel

China-based bike sharing service, Ofo, has announced winding up of its operations in India as part of their ‘global strategy to shrink footprint,’ barely six months after the Alibaba Group-backed company began operations here.

Among the seven Indian cities where the company operates, the southern city of Coimbatore was the first to be jettisoned in June.

The exit from the remaining cities--Chennai, Indore, Ahemdabad, Bangalore, Pune and Delhi--is expected in the next 60 days. Ofo had completed 1 million rides across seven cities in 10 weeks of operations.

Confirming the news to The Passage in an email, Rajarshi Sahai, director of public policy and communications at Ofo India said, “Indeed Ofo has exited India Market.” It was a part of Ofo Global strategy to shrink the footprint. The company did not wish to discuss any further.

The bike sharing company has also announced its exit from Australia and Israel.

While the company attributed the exits from these countries citing the same reason--reducing footprint--the DailyMail reported in July that a backlash from the community in Australia was at the root of its decision to abandon business in that country.

Residents in the island-nation vented their frustration on the bikes, leaving them smashed, destroyed, dumped in water or hanging from trees, Daily Mail reported.

In Isreal too, Ofo decided to quit less than five months into the launch in that country.

The company had 500 bikes in the city of Ramat-Gan and 100 bikes on the campus of Bar-Ilan University in Israel.

Ofo was founded by Dai Wei in 2014, and soon became the first bike sharing app in the world to attain unicorn status.

After a whopping USD 700 million Series E funding led by Alibaba, Hony Capital and CITIC Private Equity, the company started an aggressive global expansion, bringing the streets of the UK, US, Singapore, Thailand, Austria, Malaysia, Kazakhstan, Japan, Czech Republic, Italy, and the Netherlands within its operational radar.

Despite questions hovering around its revenue model and profitability, the company received USD 866 million funding from the Alibaba Group in March 2018.

While it’s biggest rival in China remained Mobike, which penetrated in the market slowly and focused on making sturdy bikes, Ofo bikes managed to build a fleet of 10 million of its trademark yellow bicycles in 250 cities and 20 countries.

To make itself stand out in the competition, the team, started catching up on the big data game since August 2017.

In Japan, the company worked with SoftBank C&S’s division for IOT, robotics and cloud and was the first bike rental company to announce implementing near-field communication (NFC) locks which enabled users to unlock bikes even faster.

In January 2017, the dockless bike sharing app entered India in gated communities and universities.

The company signed MoUs with the Pune Municipal Corporation (PMC) and Coimbatore City Municipal Corporation (CCMC) to enter the cities.

This was followed by a series of pilot launches in Pune, Coimbatore, Chennai, Indore, Ahmedabad, Bangalore and Delhi.

Rajarshi Sahai was quoted in the Economic Times as saying that the company had also received interest from smart city projects including Mangaluru, Srinagar, Chandigarh and Guwahati, among others, where it would expand its services soon.

“Within one month of our launch, we completed 100,000 rides across four to five cities. In Coimbatore, we completed 200,000 rides in a span of 10 weeks, that is the kind of traction we are seeing,” said Sahai had said.

While Ofo was the first International bike sharing company to enter India, there were local startups like Zoomcar’s PEDL, that had started services in October 2017. Cab aggregator, Ola had also launched Ola Pedal in November at IIT Kanpur campus.

In India, Ofo had tied up with one of the leading digital wallet Paytm- also backed by Alibaba for easy payment for rides to Ofo customers.

From January to March, Ofo bikes had 1.1 million rides when it was still in pilot stage.

This was considered a tough competition to Zoomcar’s PEDL, which had completed 1.4 million rides in 10 cities within six months of launch.

While Ofo was not charging it’s customers at all, the company decided to have a one-time deposit of INR 100 and all rides were free.

Pravin Patil, Managing Director and CEO at Starkenn Sports, India’s premium cycle brand said, “Ofo’s India exit does not mean that India or any other country that they have left are not good bike sharing markets. As far as I know,

Ofo has been facing internal issues. This will be in fact good for local players. No matter how the infrastructure is, nothing had stopped Indians from getting what they want, be it the country to have the most two wheelers or the busiest Mumbai airport.”

Speaking on the overall growth of Ofo and it’s withdrawal from countries within six months, Patil said, “I do not want to comment on that, but I believe that companies are run by people and the growth has to be organic where teams are built.”

Ofo currently remains the most funded bike sharing company with a total raised amount of UDS 2,147.84 million.

Ofo’s presence extends in countries that include Austria, Czech Republic, France, Germany, Hungary, Italy, Japan, Portugal, Russia, Singapore, Spain, the Netherlands, the UK, US.

Ofo started with a seed fund of CNY 9 million from Hongdao Capital and Will Hunting Capital in December 2015; within a year it saw funding from big investors like Ant Financial, GSR Ventures, Shunwei Capital, Didi Chuxing, Xiaomi and Alibaba Group.

The closest competition to Ofo in terms of funding remains China-based bike aggregator, Hellobike, with a total fund of USD 1,497.97 million.

Following a USD 321 million investment from Ant Financial in June, Hellobike became a unicorn and the third-largest bike-sharing platform in China, after Ofo and Mobike.

In US too, local companies like LimeBike, that cover nine cities there, became a major competitor for Ofo in Seattle; Vbike with it’s growth in Dallas remained a competition.

In Europe, homegrown dockless bike rental company, Urbo is emerging and in Singapore too local company oBike was the most popular bike renting option.

China-based brands like Bluegogo, that announced overseas expansion in December 2017 in San Frassico, becomes a threat to Ofo. To face the competition in US, homegrown LimeBike, deployed electric bikes in Seattle.

What worked for Ofo against the Uber bike sharing in US was the backing of Didi Chuxing, rivals of Uber, which wanted to spread business beyond China, without actually launching itself.

In December 2017, Ofo beniffited from a strong partnership with Didi, but when Ofo refused a merger proposal from its many investors, including Didi, its strategic partnership with Didi began to collapse.

Didi went on to acquire Bluegogo, a smaller bike-sharing brand, for around USD 10million.

The Ofo executive teams were also accused of purchasing luxurious items for their own recreational needs. While, Ofo dismissed this as a rumour, the brand had been dented a little more.

As Ofo starts saying goodbye to these countries, the bike sharing industry might see a major change with the emergence of newer players or is it the beginning of the downfall of Ofo? Time will tell.

Meeta Ramnani

Meeta Ramnani is a Bangalore-based tech reporter. She focuses on emerging startups in the fintech, edutech and healthcare space. She can be reached at  Meeta@thepassage.cc.

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