Bike-Sharing Giant Ofo’s Bicycle Orders From Shanghai Phoenix Falls 60% on New Rules, Competition

Bike-Sharing Giant Ofo’s Bicycle Orders From Shanghai Phoenix Falls 60% on New Rules, Competition

Xu Wei

Date: Mon, 05/07/2018 - 20:41 / source:Yicai
Bike-Sharing Giant Ofo’s Bicycle Orders From Shanghai Phoenix Falls 60% on New Rules, Competition
Bike-Sharing Giant Ofo’s Bicycle Orders From Shanghai Phoenix Falls 60% on New Rules, Competition

(Yicai Global) May 7 -- China’s leading shared-bike services provider Beijing Bikelock Technology Co., better known as Ofo, has failed to keep up with the promised number of bike purchases under an agreement it signed with Shanghai Phoenix Enterprise Group Co. last year, reported National Business Daily today.

Ofo’s bike purchase volume last year was less than 40 percent of a maximum of 5 million bicycles anticipated in the agreement, and it may even fall further in the first four months of this year, the report said, citing a statement from the company.

Shanghai Phoenix’s subsidiary Shanghai Phoenix Bicycle Co signed a cooperation agreement with Ofo in May 2017 when the bike-sharing sector was booming. Under the deal, the former was to supply up to 5 million bicycles to Ofo per year.

However, many firms rolling out shared-bike services has led to a stiff competition in the market, affecting the number of bikes Ofo needed. Shanghai Phoenix Bicycle's total supply to Ofo in the first four months of this year is likely to be less than 100,000 units, the company’s 2017 annual report showed.

As of May 4, the firm supplied a total of 1,861,600 bicycles to Ofo and its affiliates, generating sales revenue of CNY637 million (USD100 million), Shanghai Phoenix said in a statement.

Shanghai Phoenix estimates that its subsidiary will make CNY40 million profits if Ofo bought 5 million bikes. However, the cooperation between the two sides has so far failed to achieve the expected results, it said. The actual volume of transactions between the two parties was only 37.23 percent of what was anticipated in the agreement, it added.

During the reporting period, Ofo purchased 1,777,300 bicycles, and the company had confirmed revenue of CNY597 million, the annual report showed. The transaction price for each bike was about CNY336. Shanghai Phoenix Bicycle provided only over 80,000 bicycles to Ofo in the past four months, which indicates a sharp drop.

The result is partly attributed to new regulations about shared bicycle services in major cities, which impacted the demand, it added.

The company, however, praised the cooperation with Ofo, which it said brought business orders to the firm, further improving its brand and market influence in the sector, as well as capacity utilization efficiency and operating performance.

Editor: Mevlut Katik

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Keywords: Shanghai Phoenix, OFO, shared-bike, SERVICES