Australia's bike-sharing economy has a big dumping problem

Executive Summary

The purpose of this report is to outline the disposal of bikes in the city streets of Australia that results from pulling out of foreign bike-share companies from the country. The reason behind the rampant liquidation of foreign companies is government regulations that inhibit effective operation in various cities of Australia. This report combined information from newspapers, reports, and lecture notes. Findings indicated that the increased disposal of bikes in two hundred streets of the nation was a result of poor docking schemes, returns of customer deposits, and strict government regulations. The ultimate outcome of these actions was decreased in investments, degradation of the natural aesthetic, and reduction in demand for bikes. The main stakeholders in this report are Australia, bike-share companies, the government, and consumers. The report will expound on the effect each action has on all the stakeholders. Furthermore, the paper will discuss the correlation of the various actions on share bikes and relevant economic principles. The highlighted principles include a decrease in demand, government regulations, and negative externalities. Towards the end of the paper, recommendations are made on the major issues affecting bicycle firms. These recommendations include public education, development of relevant infrastructure for cyclists, good quality and durable bikes, a collaboration between operators and local authorities on docking stations, and enhanced docking schemes. Moreover, the paper discusses the importance of favorable government regulations on attracting and maintaining investment.

1. Introduction

Bike economy is a major contributor to the economy of Australia. Its adoption was a means to control environmental pollution caused by vehicles. Moreover, it reduces government expenditure on fuels which diverts the funds to other economic activities that improve the welfare of the citizens. However, the business is facing various challenges that have led to the liquidation of various firms. In 2018, the guardian announced the pulling out of two more companies from the capital market in the country. The various firms in operation before the pull out included Ofo, Obike, Limebike, Reddy Go, and Mobike. Ofo, a China-owned firm together with Reddy Go pulled out of the Australian market a year after they joined. Ofo has set up its operations all over the world and holds the largest shares of bikes. The move by these two companies to withdraw from the various cities was after the liquidation oBikes from Melbourne. This move followed controversies with the local authorities concerning the inappropriate disposal of bikes in various parts of the city. Furthermore, the move affected many customers who complained of denied access to their deposits from the company. This paper will discuss the major issues affecting the Australian bike market and the effects on the various stakeholders in the industry.

2 Main Issues

The global rise in environmental consciousness has led to the growth of various businesses that seek to reduce and eliminate environmental degradation. One such industry is the bike-share industry that seeks to reduce the pollution caused by automobiles in various parts of the world. The beginning of this business received much anticipation from locals and international customers. As a result many firms invested in the purchase and distribution of motorbikes. The move was so haphazard that it failed to consider various aspects of the new markets. In Australia especially, bike-share companies flooded the market to the point that the supply was too much for the demand. This state of affairs caused a fall in equilibrium price since the demand is lower. Moreover, most customers were dissatisfied with the docking schemes of various bike firms. These schemes do not provide flexibility for customers that seek constant access to these bikes. Additionally, the liquidation of Obike caused concern among customers who claimed a refund of their deposits. The good news is, the government ensured customers of a legal follow up on the companies that owned them deposits. The major issue that connected all these problems is the government regulations on the operations of bike-share companies and the infrastructure. The entrant of these companies in the Australian market provided dockless bikes that had no specific docking location. As a result, various city authorities raised concerns about the environmental effects of dumping that the bicycles had caused. As a result, they addressed firms to take actions that would reduce these activities. Moreover, studies show that most riders prefer separate infrastructure to use when they are riding; one that is far from the rest of the means of transport. These activities have also contributed to the reduced demand for bikes.

3. Stakeholders

3.1 China

China owns the largest shareholder company in the bicycle industry. The Ofo Company is a global firm that has influence in various countries. On October 24^th, 2017, the Sydney Morning Herald (SMH) recorded the launch of two hundred bikes across the city by Ofo firm. The entry was despite the many bike shares in the city and the controversies over dumping. The China-owned firm allocated seven hundred million dollars in its expansion project to cover two hundred cities of the world in 2017. The company’s entry into the country contributed greatly to the Gross Domestic Product. Moreover, it advanced the mission of conserving the environment. Pulling out of Australia in 2018 not only exposed the weak spots of the country in the bike business but greatly impacted the economy. Many consumers who had confidence in the cleaning up of the surrounding from non-biodegradable materials were greatly disappointed. They also had the fear of losing their deposits to the companies that were withdrawing investment in the market.

3.2 Australian market.

Cycling has increasingly gained popularity in various population demographics over the past years. Aware of the environmental damage that personal and public means of transport cause, many people are now moving towards friendlier commuting means. Bicycles not only serve the need for commuting but also leisure activities. Hence, the revenue from bicycle business and repair industries