We believe Ofo, one of China’s biggest shared bicycle operators, will leave Singapore market soon.
It is the only logical option for them since Land Transportation Authority, Singapore’s transport regulator, imposed a S$60 (US$45) fee & deposit for EACH bicycle deployed in the city.
If ofo really has the 70,000 to 80,000 bikes it claims to have deployed, it will need to fork out between S$4.2 million and S$4.8 million – a quite hefty sum.
This comes at a time when the company is running out of money to sustain its core operations in China.
Of course they might choose otherwise (i.e. not to leave) – but that would not make sense.
Ofo is having a global retreat because of reasons including cash crunch and attention deficit. This is barely a few months after it started expanding everywhere.
Just Google “Ofo is leaving” – and you will find plenty of entries from news sources of different cities across the globe:
This is understandable and if you were the Ofo management, you would have done the same. Shared bikes are no longer apple of the eye of investors; and with rival MoBike exiting the market and giants such as Alibaba bullying into the market, it is hard for ofo to survive standalone.
To fight for survival, before anything else, ofo needs to conserve cash, and start making money. Oversea markets are not money (or valuation) making but management-attention distracting, so cutting them is natural.
Those who criticise Ofo for flip-flopping are probably not familiar with the nimbleness companies need to survive in the ultra-competitive venture-fuelled tech industry.
That is a shame for Singapore, as it could have been a profitable market for a couple of reasons:
- the climate is conducive. Some observers from China who claim it is too hot have apparently not been to Singapore. It is cooler than China in summer times – and the competition for cycling in Singapore is not taxis, but walking.
- The government is supportive in policy and infrastructure building – that brings plenty of opportunities for the operators to work closely with the government;
- Per ride cost is much higher than that of China – making profitability easily reachable.
- Credit card penetration is high – and people do not have much problem topping up money into wallets if they find the service useful.
In addition, many Chinese companies started with Singapore because it has a large Chinese speaking population, and is the frequent stops of high profile Chinese investors. Visibility before the investors surely would have helped when everyone was racing for more money last two years.
That said, the market is not big enough for venture-backed companies. Also to work with government to shape a biking future, the operators need to be very patient as it does take time to think things through and experiment in stages before rolling out massively – again this is not the cup of tea for venture-backed companies.
Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected]