China’s third largest bike sharing company has reportedly run into financial trouble, amid a wave of busts and consolidations in an industry that took the country by storm this year.
Bluegogo burned through 600m yuan (£68m) in investor funding in the year since it was founded by its youthful CEO Li Gang, deploying 700,000 bikes across cities in China.
Commonly hailed as the “Uber for bikes”, cycle sharing companies saturated Chinese streets with a technicolour of orange, yellow and blue cycles, frequently crowding out pedestrians. Infamous scenes of derelict bicycles piled in mangled heaps have become common sights.
The companies let customers rent bike using their smartphone, and bicycles could be dropped off anywhere. Users pay a deposit fee of 99 to 299 yuan (£11.30 to £34.10) depending on the company and then are charged a fee for every 30 minutes of use.
But as reports emerged Bluegogo was in trouble, Chinese social media erupted with users complaining they were unable to get their deposits back, and rumours that Li had fled the country.
Bluegogo claimed it had 20m users across China at its height in an open letter written by Li this week. That would mean the company at one point had at least 1.98bn yuan (£226m) in deposits, although it is unclear how much the company is currently holding.
Rumors have also spread on Chinese social media saying Li had left China, prompting him to post on his profile: “I have always been in the country, fighting on the front lines for redemption”.
The company’s operations will be taken over by another bike sharing startup, Li said in the letter. Visits by Chinese journalists to Bluegogo’s offices found the doors locked and office space abandoned.
Bluegogo did not respond to e-mails and text messages seeking comment.
In the open letter, Li said the company’s problems began in June, “first with an advertising accident that affected a large investment and possible acquisition”.
The ad campaign ran over 4 June replaced the icons for some bikes with tanks, with users encouraged to take those bike to win prizes. The promotion coincided with the 28th anniversary of the 1989 Tiananmen Square massacre, when Chinese soldiers killed thousands in an effort to suppress democracy protests, and tanks rolled through the streets of Beijing.
A company that supplies bikes to Bluegogo is reportedly still owed 10m yuan, saying Bluegogo suspended orders in April, citing financial problems.
At least three other bike sharing companies have also gone bust in recent months, although Bluegogo is by far the largest. The wave of consolidations may mean China’s bike sharing industry will soon be dominated by just one or two companies.
Bluegogo tried to expand into San Francisco earlier this year but was met by stiff resistance from local politicians. Less than four months later, the company suspended its US experiment. The company also supplied bicycles for an Australia-based bike sharing firm Reddy Go, although it is an separate entity.
By Benjamin Hass