Another Chinese bike-sharing firm goes bust as Mingbike fires 99% staff

Photo: Mingbike

It’s not good news for the China biking industry that had been investors’ favourite so far.

After the collapse of two firms – Bluegogo and Coolqi – in the recent past, things look bad at Mingbike as well that has fired 99 per cent of its staff, reported the South China Morning Post on Friday. Some of them weren’t even paid salaries for several months, it said.

Guangzhou-based Mingbike appears to have gone bust after numerous complaints by customers who were having difficulty in getting deposit refunds. A report issued by the China Internet Network Information Center in August estimated that users may have paid 10 billion yuan in deposits for using shared bikes.

Just a few days ago, the chief executive of Beijing-based Bluegogo said in a public letter posted online that he had “made mistakes” and the firm was winding up. He apologised to investors, partners and 20 million registered users of the company’s 600,000 bikes. Another firm Coolqi, that had 1.4 million bikes, is struggling to stay afloat.

Gao Weiwei, the former CEO of Coolqi, said the 650 yuan ($98) cost of a bike was enough to cover the deposit of 298 yuan. “In the worst scenario, we will allow users to ride our bikes home,” he was quoted as saying in media reports.

The two firms have also appeared on the latest list of bankrupt bike-sharing firms issued by the China E-Commerce Research Center (CECRC), Chinese media reported.

China’s bike sharing industry, which is dominated by leaders Mobike and Ofo, has seen a huge capital influx with the spread of smartphones and a surge in mobile users. The market operating with about 40 such platforms had attracted $2 billion in funding over the last 18 months, the report said.

Mobike had in June raised $600 million in a Series E funding round led by Tencent. It also received funding from chipmaker Qualcomm Inc this month. The startup now claims to have over 100 million users in China. The following month, rival Ofo raised more than $700 million from investors including Alibaba, Hony Capital and Citic Private Equity.

Recently, Bloomberg reported about early merger talks between the two to create a single dominant player in the fast-growing business.

However, the funding is not coming easy for smaller players. In fact, it has only become more difficult with the imposition of a limit on the number of shared bikes in the region. The industry also foresees consolidation in terms of mergers and acquisitions among smaller players for long-term survival. In fact, the process has already begun with Shanghai-listed Changzhou Youon Public Bicycle System announcing a merger with Hellobike to better compete against its rivals in October this year.

China’s bike-sharing market is expected to reach 10.3 billion yuan (US$1.5 billion) in revenues this year from 1.2 billion yuan in 2016, according to a report from iiMedia Research. The number of shared-bike users in China is expected to touch 209 million this year, compared with 28 million last year.