Chinese bike-share company Ofo is being sued by manufacturer Shanghai Phoenix Bicycles over “unpaid bills” that total nearly $10 million, according to the Financial Times. It’s the latest in a series of setbacks for the company this year, and shows some of the problems that the on-demand bike companies are facing around the world.
According to FT, Ofo signed a contract with the manufacturer for five million bikes in May 2017, which it would purchase over the course of a year. But during that period, Ofo only purchased just under two million bikes, leaving Shanghai Phoenix Bicycles hanging with a 55 percent drop in income, which prompted the lawsuit. Earlier this year, the manufacturer said that it would likely deliver less than 100,000 bikes to Ofo between January and April.
The bike-share industry appears to be experiencing a slowdown, due to increased competition and regulation
This latest lawsuit is another headache for Ofo, one that’s symptomatic of the larger industry. That decreased demand appears to be due to both increased competition from other bike-share companies, and an increase regulation for ride-share services in cities around the world, which haven’t been thrilled at the prospect of the bikes littered across their streets.
As it expanded to Asia, Europe and the United States over the last two years, Ofo burned through a lot of money, and that slowdown in demand is causing problems. It had to raise nearly $900 million in May, and began to pull back from some of the markets that it had only just entered, retreating completely from places like Australia, Germany, India, and others. In July, it announced that it was shutting down most of its operations in the US to focus on only a handful of cities — dumping hundreds of bicycles at recyclers as it does so.