After the Wild West begins, scooter providers chase scale to survive

Georgia Jexley, City Head of Micromobility Company Tier, UK and Ireland, is preparing to demonstrate an electric scooter in London, UK, on ​​August 25, 2021. Taken on August 25, 2021.Reuters / Nick Carry

October 14, 2021

By Nick Carey and Carolyn Cohn

London (Reuters) – The fast-growing era of electric scooters faces tighter regulations, more demanding customers and cautious insurers, giving way to a more selective expansion focused on profits. I am.

A company offering minute-by-minute rentals of e-scooters, severely damaged by the global coronavirus blockade last year, has a ridership of pre-COVID 19 among consumers in cities who want to avoid public transport and taxis. It is said that it has soared to the level.

But that doesn’t mean that the app-based industry is back in a bohemian pre-pandemic world where “micromobility” companies were loosely regulated and funded by investors.

Scooter companies are currently facing cities using licenses to limit the number of operators, consumers demanding better software and vehicles, and insurance companies fearing safety risks.

This is pushing up costs and pushing low-margin industries for further integration. Boston-based Zagster was acquired by transportation technology company Superpedestrian in 2020, and San Franciso-based Scoot was acquired by Bird Rides in 2019.

Travis Vander Zanden, CEO of Santa Monica-based Bird, will be unveiled in a merger with the special purpose acquisition company (SPAC) Switchback II Corp. “Economics really needs scale to work. You’ll see some of the little players fall to the side of the road.”

Bird is a global player who expects to double its revenues from 2020 to 2021 after a pandemic and double again in 2022 to $ 400 million. This is still small compared to car-based ride-hailing service companies such as Uber, which had total revenue. It will be $ 4.1 billion in 2019.

According to startup data platform PitchBook, Bird’s planned merger (Switchback II’s shareholder vote on November 2) will be worth $ 2.3 billion, about more than the January 2020 price. It is 20% lower. Lime, also a global player, confirmed in a June 2020 funding round that its valuation dropped by nearly 80% from one in less than a year.

The pandemic is well-received, but Reuters analysis has also blocked funding for many small electric scooter providers.

“There are many companies that can’t invest in hardware, safety features, or training,” said Wayne Ting, CEO of Lime, which includes Uber as an investor. Lime has acquired Uber’s micromobility unit Jump.

The current environment is far from 2017, when electric scooters accessed from smartphone apps first appeared. Chicago-based Veo CEO Candice Xie, who operates in more than 40 cities in the United States, said flooding of new providers, primarily in European cities, hosting an unlimited number of vendors. He states that he created the “Wild West Competition”.

“Many companies have bottomed out to gain market share,” she said.

Vehicles were dumped on the road from Detroit to Paris, coining the term “scooter bright”.

Early rental scooters were “consumer-friendly and not designed to achieve high levels of utilization,” said Fredrik Hjelm, CEO of Voi Scooters. Based in Stockholm, Voi operates nearly 100,000 scooters throughout Western Europe.

New sheriff in town

Cities and countries are now tightening regulations and creating strict licensing bidding processes aimed at limiting the number of scooter providers.

Copenhagen temporarily eliminated all scooter providers earlier this year while rewriting regulations.

Some US cities, including Colombia, Missouri, and Winston Salem in North Carolina, allow electric scooter providers to return under greater supervision after being kicked out.

Large scooter providers say that licensing a small number of proven major players will ensure better service and allow larger fleets to operate in a profitable way.

“This is a slim margin and scale-up game,” said Voi’s Hjelm. “And it’s much better to have fewer denser operators.”

The UK has started a trial project for e-scooter providers in certain cities, but there are speed limits and users must have a driver’s license.

Helen Sharp, head of the e-scooter trial for Transport for London’s three operators, Lime, Tia and Dot, said:

To meet London’s requirements, Berlin-based Tier has developed software that prevents scooters from accessing certain congested roads.

“You may be able to push it, but it’s not easy,” said Georgia Jexley, head of the British and Irish cities of Tia.

But better scooters and software drive up costs.

Fred Jones, General Manager of the Northern Europe region of Tier, states that the company’s scooters can now be used for five years and can extend their lifespan with 83 replaceable components.

“It costs a lot not only for scooters, but also for the parts and skilled labor to maintain them,” Jones said. “If you don’t understand it correctly, economics won’t work.”

Ensuring that they do so is the key to financing.

Silicon Valley venture capital firm Autotech Ventures avoided micromobility companies until it acquired Chicago’s Veo and other unidentified companies this year.

Dan Hoffer, Managing Director of AutoTech Ventures, said:

In the first half of 2021, venture capital trading activity in the micromobility sector fell from $ 4.6 billion in the same period in 2020 to $ 1.4 billion, according to PitchBook.

Warning insurance

Another problem for potential electric scooter providers is that insurance companies consider electric scooters to be inherently more dangerous than motorcycles and cars. “Riders are particularly vulnerable to cyclists,” said Martin Smith, Motors Technical Claims Manager at Aviva, a leading UK insurance company that does not cover e-scooters.

Regular car insurance companies such as AXA UK, Admiral and Unipolsai also avoid e-scooter providers and leave it to specialists such as Zego. Bird CEO Vander Zanden emphasizes the benefits of scale by using data from 300 cities operating around the world to reduce premiums.

We have also added physical safety features such as double braking and developed software to launch irresponsible riders from service. All of these run on their own operating system.

“Having a great car is one thing,” said Vanderzanden. “But we need data to show the insurance company for this to work.”

(Additional report by Paul Reinert of Detroit, Andrea Mandala of Milan, Mubiya M of Bangalore, edited by Joe White and Mark Potter)

After the Wild West begins, scooter providers chase scale to survive

Source link After the Wild West begins, scooter providers chase scale to survive

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