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oBike blames new rules for Singapore exit, but writing already on the wall
THE announcement on Monday may have come as a shock to commuters, but the writing was already on the wall for oBike.
oBike said it is shuttering its Singapore operations and will not be applying for a bike-sharing licence from the Land Transport Authority (LTA), citing difficulties in complying with proposed regulations here.
This follows just two weeks after the homegrown bike-sharing operator pulled out of Australia, reportedly ahead of a similar regulatory crackdown there.
The Business Times understands, however, that regulations notwithstanding, financial pressures could have played just as big a part in the pullout. Launched in Singapore in January last year, the company has, since early this year, been grappling with cash flow problems, including its having run up a loss of more than S$4 million last year and owing various service providers months of fees.
For the financial year ended Dec 31, 2017 (FY2017), oBike brought in S$912,668 in revenue, but recorded some S$4.25 million in losses, according to BizFile data. Its total current liabilities stood at S$22.7 million, while its total current assets came up to S$11.3 million.
It also owes "several months of fees" to Ruder Finn, a public relations agency in Singapore. BT understands that oBike engaged Ruder Finn's services last September, but that its contract with the PR outfit has been "put on hold due to payment issues".
oBike's logistics partner, which rounds up indiscriminately-parked oBike bicycles, suspended its services to oBike this year when it hadn't been paid its fees, BT has learnt.
The source, who declined to name the logistics partner, said oBike had told this partner that it was in talks for a merger or acquisition and that the fees would be paid when oBike found a new owner. But those talks are believed to have fallen through.
Lee Der-Horng, director of the NUS-LTA Transport Research Centre, told BT that oBike's exit from Singapore did not come as a surprise, and in fact demonstrated that the bike-sharing business model is "simply not sustainable".
He said: "I will not be surprised if more operators are forced to step out of the small Singapore market. Their incomes are pathetic. Whatever fees they collect are far less than their expenses. We haven't seen the operators develop new avenues to expand their incomes based on the mobility data they have collected. The bursting of the bike-sharing bubble is just a matter of time."
Chua Boon Ping, chief of SPH Ventures, agreed that a consolidation of the bike-sharing sector is imminent. He told BT that bike-sharing startups are increasingly becoming less attractive to venture capitalists, given the high regulatory costs required to maintain their operations.
"Take Mobike. After raising a huge amount of venture capital (US$928 million), it was sold to Meituan-Dianping for only US$2.7 billion. This deal has given the sector a reality check."
On Monday, oBike said in an official statement that bike-sharing, as a first- and last-mile mode of transportation, has an important role to play in a car-lite society. "However, due to the new regulations imposed by the authorities, this will not be a viable business model for oBike, and we foresee that it will only cause the company to sustain further losses."
The Parking Places (Amendment) Bill tabled in March is aimed at tackling the indiscriminate parking of about 100,000 shared bicycles in Singapore. If it is passed, operators will be required to share information with each other on those who park the bicycles indiscriminately, so that these recalcitrants can be penalised.
In assessing operators for the operator's licence, the LTA will consider their ability to manage indiscriminate parking by users, their fleet utilisation rate and other factors.
BT understands that under the new rules, operators will also have to pay S$60 for every bicycle they deploy. This comprises a S$30 licensing fee and a S$30 security deposit. They will also pay a S$1,500 one-time application fee. (Australia's new rules require operators to pay A$3,000 (S$3,040) in fines if an abandoned bicycle blocks a street for two hours.)
China-based ofo and Mobike, as well as Singapore-based Anywheel and SG Bike, confirmed on Monday that they are applying for the bike-sharing licence from LTA before the July 7 deadline. Another local player, GBikes, has already said it would bow out next month.
Notably, GBikes and oBikes are no longer partners of GrabCycle, Grab's marketplace app that lets users access various bicycle and e-scooter sharing services on one platform. GrabCycle's remaining partners are Anywheel and PopScoot.
A Grab spokesman said: "We are strong believers in the bicycle- and personal mobility device-sharing opportunity, and its impact on the livability of our future cities. We will continue to serve and grow GrabCycle as we work towards our vision as the everyday app with multiple transport options and daily essential services for consumers."
Perhaps the biggest question on oBike users' minds on Monday was the fate of their deposits. To rent an oBike bicycle, they had each placed a one-time S$49 deposit, and thereafter, had paid usage fees of 50 Singapore cents for every 15 minutes; students paid a deposit of S$19.
In response to the question, an oBike spokesman said: "Check back on Facebook for updates."