(Yicai Global) March 9 -- Chinese car-sharing platform GoFun, which once attracted investment from Volkswagen, has quietly withdrawn from many cities due to the failing revenue model familiar from the recent bike-sharing boom.

“It can be foreseen that GoFun will continue to shrink this year and may shut down within 2021,” a person close to the Beijing-based firm's investment, financing, and operations department, told Yicai Global.

Following the Bike-Sharing Playbook

"The car-sharing industry is likely to become the next bike-sharing industry," the same source said, referring to the recent rise and fall of bike-sharers. "The profit model is not found, capital investment enthusiasm is gone, and the sector has entered a vicious circle. There is a mess in the end.”

China still has almost 120 car-sharing platforms, even though many have been reported to be going through cash squeezes since last year. The number used to be as high as 300.

Since the second half of last year, GoFun’s fleet seems to have gotten scarce, said a user. Yicai Global could only find a few cars in some of the popular downtown locations in Beijing yesterday. After the firm's quick expansion a few years ago, it had over 28,000 cars in major Chinese cities as of March 2019.

Founded in February 2016, GoFun is a joint venture formed by state-owned tourist bus fleet operator Shouqi Group and Beijing Tourism Group. The JV bagged CNY241 million (USD37 million) in its Series A round of financing from Volkswagen and others in November 2017. Last October, it finished its Series B round, receiving hundreds of millions of yuan from investors, mainly state-backed industrial investment funds.

The business model of high investment and low prices is unbalanced, said an industry insider. GoFun earns about CNY60 (USD9.20) on a good day per car and as little as CNY30 during the low season while the sum should be above CNY120 (USD18.40) to make a profit, the person added.

Staff Drain

GoFun’s Chief Executive Tan Yi resigned in late January, several executives, some of whom had already left the company, told Yicai Global. The firm has withdrawn from a number of projects across China, they added.

The company is quite stagnant as people leave every day and no replacements are searched while salaries even for staff at the headquarters are delayed, said an executive who recently resigned.

GoFun started to withdraw from some cities in the second half of 2019, and the number of cars has been significantly cut in the remaining cities, the former executive, who wished to remain anonymous, added.

Users who couldn't get their deposits back have been filing complaints. Sina’s complaint platform Heimao has logged almost 8,000 entries about the firm.

Editor: Tang Shihua, Emmi Laine, Xiao Yi