ofo Investor Says it is Profitable Only When Mobike Merges with ofo
On the Third Fudan Chief Economist Forum in Shanghai, when talking about sharing bicycle development, Allen Zhu, the managing director of GSR Venture and investor of ofo, said that Mobike and ofo accounted for 95% of the total market share, but they still would spend more fund in operation. Profitability is possible only when the two merge with each other. As for the question of which merges the other, Zhu said it didn’t matter for capital.
In fact, in June, he said publicly that he thought there was no possibility of a merger between Mobike and ofo. In addition, he had a distance debate with Tencent CEO Pony Ma, who is also Mobike’s investor. The quarrel focused on who was the market leader, and how could ofo develop without smart lock? In past over three months, both giants, Mobike and ofo, have raised hundreds of millions of dollars for new generations of products as well as expanded abroad. But they haven’t solved the problem of profitability. Meanwhile, a great change occurred in the sharing cycle market.
Governments around the China have issued more and more new policies on sharing bicycles, and administration on sharing bikes has become more and more stringent. At present, more than 10 cities including Beijing, Shanghai, Guangzhou, Shenzhen and Wuhan have rules or advices on suspending putting more sharing cycles and have released clear requirements on lifespan, deposit and operations of sharing bikes.
Influenced by these policies, many “bike graveyards” appeared in Beijing, Shanghai and other cities. A few of bikes abandoned there are damaged but more of bikes abandoned are in good function. While on the other side, new bikes are produced continuously. What about the undamaged bike that was abandoned? How to process or update cycles exceeding their operation period? How to earn profit? None of questions are answered directly by sharing bike companies.
When Mobike and ofo just started, some voices in the industry said they would merge like Didi and Uber. At the time, investors and official statements of both companies indicated that the sharing cycle model was different from that of Didi and Uber, so there was no possibility of merging.
The founder of ofo has said more than once in public that “At the end of the year, ofo will be twice as much as Mobike and ofo has no strong wish for merging”. We have no idea what he felt after hearing the Zhu’s “advice”.
This article originally appeared in DoNews and was translated by Pandaily.
Click here to read the original Chinese article.