Chinese bike-sharing platform ofo has been sued by a subsidiary of its supplier Shanghai Phoenix Bicycle Co for defaulting on about 70 million yuan ($10.2 million) in payments, the bicycle producer announced on Friday.
Under a framework agreement signed in May 2017, Shanghai Phoenix had detailed procurement agreements with ofo's operator, Dongxia Datong. But as of the date of the litigation, ofo still owed Shanghai Phoenix 68.15 million yuan, which "seriously breached the contract," and Shanghai Phoenix brought the case to the Beijing First Intermediate People's Court in recent days, according to the announcement.
In the litigation claims, Shanghai Phoenix demanded that ofo repay 68.15 million in defaulted loans as well as 1.87 million in losses incurred by ofo's overdue payments. It also demanded that ofo pay 200,000 yuan for attorney fees and security deposits as well as litigation fees.
Ofo did not respond to an interview request of the Global Times as of press time.?
But according to media reports, this is not the first time the bike-sharing start-up has faced financial issues. Financial news website caijing.com quoted anonymous sources in a report over the weekend that ofo had also defaulted on several logistics suppliers such as yunniao.cn and Deppon as well as maintenance factory loans exceeding 100 million yuan.?
A source close to the matter told the Global Times on condition of anonymity that the company's executives are in talks with ride-hailing platform Didi Chuxing for a "fire sale" of its business.
Industry insiders pointed out that ofo's fall is a vivid example of how bike-sharing platforms' cash-burning business model, combined with reckless expansion, could lead to a dead end, especially after the government tightened grips over the bike-sharing industry.
