Australia's bike sharing industry is near collapse as 3 major companies shut

Brook Mitchell /Getty ImagesA pile of Obikes in a local park in Bronte, Sydney.
  • Three bike sharing businesses — oBike, ReddyGo and Ofo — have gone from Australia.
  • Their departure has called into question a business model more based on data collection than fees.
  • Another key issue was the number of bikes — too many were servicing the market.

The scramble to establish a viable bike sharing business has all but ended in Australia, leaving behind broken and abandoned frames and a business model that didn’t work.

Most bike sharing businesses in Australia have withdrawn from the market over the past week, including oBike, ReddyGo and Ofo.

They came up against local residents and councils in capital cities who didn’t like that the bikes ended up in the local river, or up a tree, or mangled in a back street, or as part of an impromptu art installation.

In Victoria, the Environment Protection Authority Victoria gave oBike deadlines for removing the yellow rental bikes when they were dumped or damaged, and empowering the City of Melbourne to issue fines of up to $3,000 for each incident.

oBike pulled out of Melbourne and on Friday its parent company in Singapore went into liquidation.

Reddy Go, the Australian bike share company, told its members it is restructuring, offering two free bikes to those who didn’t want to take part in the yet to be announced new business.

And Ofo, a business founded in China, today announced the end of Australian operations.

“Ofo has made a strategic decision to focus on priority markets internationally,” a spokesperson said.

“ofo will therefore wind-down operations in Adelaide and Sydney during the next 60 days. As part of this process ofo will begin to remove bikes from cities and consolidate them to our warehouses.

“This decision does not come lightly, and ofo Australia will act responsibly in each market as it winds down operations, resolving any outstanding concerns before finalising operations.”

An art installation in a lane way in Melbourne using oBikes. Michael Dodge/Getty Images

While bike sharing services have proved popular in Europe and China, they have struggled in Australia due to local laws, vandalism, complaints about misplaced bikes, and data collection concerns.

Kim Do, a Senior Industry Analyst for IBISWorld, says bike sharing businesses have two main hurdles.

“The first is balancing supply and demand. An oversupply of bikes is a key reason why dockless bike sharing services are failing in Australia,” she says.

“An abundance of bike sharing start-ups have entered the Australian market over the past year, all fighting for market share. However, the number of users has failed to grow in line with supply, leading to a glut of share bikes.”

Bike sharing companies have also failed to identify and implement ways to incentivise consumers to correctly park their bike. This led to the second issue for bike sharing services — vandalism and dumping.

“As Australian government authorities began to crack down on dumping, imposing fines of up to $3000, Australia was no longer a viable market for these players,” she says.

The bike sharing business model, of obtaining revenue through data mining, advertising and interest on deposits, rather than the fee charges per ride, is an additional issue.

“A substantial amount of revenue for bike sharing companies stems from selling consumer data to other businesses,” she says.

“This includes details such as rider profiles and locations frequented. This data is then used by other organisations to assist with urban planning, marketing campaigns, or to assist with identifying locations with high consumer traffic.

“However, a business model that relies on data mining poses an issue, as consumers have become increasingly cautious of data breaches.”

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