Ofo’s Rise and Costly Collapse | Generated by AI
Ofo’s failure in China came down to several interconnected problems:
Unsustainable business model: Ofo burned through cash trying to outcompete rivals like Mobike. They flooded cities with bikes to gain market share, but the unit economics never worked - maintenance and replacement costs were high while rental fees stayed very low (often just 1 yuan per ride). They were losing money on nearly every trip.
Vandalism and theft: Millions of bikes were stolen, vandalized, or dumped in rivers and alleys. Without GPS tracking on earlier models, bikes were nearly impossible to recover. The famous “bike graveyards” of thousands of abandoned, broken ofo bikes became a symbol of the sharing economy’s waste.
Deposit refund crisis: Ofo collected deposits from users (typically 99-199 yuan) but used this money for operations rather than keeping it in reserve. When the company started failing in 2018, millions of users couldn’t get their deposits back. At one point, over 10 million people were waiting in a virtual queue for refunds.
Excessive competition: The bike-sharing wars saw multiple companies competing in a race to the bottom. This led to oversupply - some Chinese cities had more shared bikes than residents needed, creating chaos on sidewalks and streets.
Management issues: Ofo’s young founder Dai Wei reportedly refused multiple acquisition offers that could have saved the company, including from Didi. Poor strategic decisions and inability to achieve profitability compounded the structural problems.
The company basically represents a cautionary tale about prioritizing growth over sustainability in the sharing economy.