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Bike-sharing services

Hong Kong bike-sharing start-up Gobee.bike goes bust from losses and high maintenance costs

Co-founder Rafael Cohen says HK$399 refunds will be given for deposits, but remaining credit in users’ accounts will not be returned

PUBLISHED : Tuesday, 10 July, 2018, 11:32am
UPDATED : Tuesday, 10 July, 2018, 10:42pm

Hong Kong’s first bike-sharing service, Gobee.bike, has gone bust due to losses and high maintenance costs, according to its boss.

The start-up promised to refund HK$399 (US$51) in deposits to each user. Existing users could continue to use the service until July 17, but the company would stop accepting new payments on Tuesday, founder and chief executive Rafael Cohen announced on social media the same day, bringing an end to the firm’s 15 months of operation in the city.

“Our decision is purely due to our financial situation,” Cohen said in a statement.

“After a year in service, we unfortunately have not been able to make the service profitable, and the financial costs of maintaining the bikes in their best condition have proven to be too high for us to sustain the business.”

Although the deposits would be returned to users, Cohen told the Post that the remaining value in their accounts was not refundable, according to the terms and conditions of the service.

“That’s why we allow the users to use the bikes for one more week,” he said. “We hope the weather will be good.”

Hong Kong was the last market Gobee.bike was operating in after shutting down its business in Europe in February. The company had gradually laid off 100 staff since the beginning of this year.

“It is a sad day,” Cohen, 29, said. “It is my first bankruptcy.”

The French entrepreneur added that he would continue to live in Hong Kong, but intended to take a holiday soon.

Hundreds of users complained on the company’s Facebook page about not getting a refund on their remaining credit.

Some of them, like user George Wong, had panicked upon hearing the news and closed their accounts.

Wong said the HK$95 he had in credit was not refunded, and he was not able to use the service for the final week as the account had been closed.

“Do I lose that HK$95?” he asked.

User Dave Cho said services should have been continued for a month, as a week was insufficient time for him to use up the remaining hundreds of dollars in his account.

The Consumer Council said that as of 5pm on Tuesday, it had received eight complaints regarding the shutdown and 11 inquiries about refunds of deposits and credit in accounts.

The consumer watchdog added that it was unreasonable not to refund the credit, which was not the company’s property. If the company was unable to provide the service, it should refund the credit balance, it said.

Gobee.bike charges HK$2.50 for 15 minutes of use, or HK$10 an hour. Traditional bike rental companies charge HK$40 a day and require users to rent and return bikes at specific locations.

Cohen estimated that Gobee.bike had about half of the bike-sharing market in the city, with 80,000 active users and 350,000 registered users.

Osman Mohammed Arab and Wong Kwok-keung of RSM Corporate Advisory (Hong Kong) have been appointed as the joint and several provisional liquidators and will audit the start-up’s assets, mainly consisting of 17,000 bicycles scattered mostly around the New Territories.

Gobee.bike faced fierce competition in Hong Kong, with about five rivals – including Ofo, Locobike and HobaBike – emerging during the past year, in addition to traditional bike rental firms.

Bike-sharing, in the city and abroad, is notorious for causing social problems as users haphazardly park the vehicles anywhere they wish. The bicycles have also become targets for vandals and thieves, with some found abandoned in river beds or with their parts stolen.

In August last year, the Hong Kong start-up successfully raised US$9 million to strengthen its technology, research and development, as well as to fund its global expansion.

“We have spent the money, mostly on buying new bicycles,” Cohen said.

But this February, Gobee.bike ended its operations in France and Italy, also citing the high cost of maintenance.

Theft, vandalism force Gobee to retreat from Europe

Gobee.bike’s first venture capital round was led by venture capital firm Grishin Robotics, with participation by the Alibaba Hong Kong Entrepreneurs Fund, a non-profit initiative by the world’s largest online shopping platform operator to nurture the city’s start-ups. Alibaba is the owner of the South China Morning Post.

The closure marks a setback for the region’s bike-sharing industry, which had appeared to be thriving in recent years. In mainland China, for example, there are about 40 players, with the battle for users so intense that some companies were swallowed up in mergers and acquisitions.