After Wild West begin, scooter suppliers chase scale to outlive By Reuters
© Reuters. Georgia Yexley, UK and Ireland’s city chief at the micro-mobility company Tier, gets ready to demonstrate an e-scooter in London, Great Britain, 25 August 2021. Picture from August 25, 2021. REUTERS / Nick Carey
By Nick Carey and Carolyn Cohn
LONDON (Reuters) – The era of breakneck growth for electric scooter companies gives way to more selective, profit-driven expansion as they face tighter regulations, more discerning customers and cautious insurers.
Badly hurt by global coronavirus lockdowns last year, companies that offer up-to-the-minute e-scooter rentals say passenger numbers are rising to pre-COVID-19 levels among urban consumers who want to avoid public transit or taxis .
But that doesn’t mean the app-based industry is returning to the pre-pandemic free-running world, where “micromobility” businesses were loosely regulated and money raked in from investors.
Scooter companies are now facing cities that use licenses to limit the number of operators, consumers who demand better software and vehicles, and insurers who are suspicious of safety risks.
This is driving up costs and will force the low-margin industry to consolidate further. A few smaller vendors have already been acquired, including Boston-based Zagster, which was acquired by transportation technology company Superpedestrian in 2020, and San Francisco-based Scoot, which was acquired by Bird Rides in 2019.
“It really takes size to get profitability up and running,” said Travis VanderZanden, CEO of Bird, based in Santa Monica, which merged with the Special Purpose Acquisition Company (SPAC) Switchback II Corp. to go public. “So I think we’ll see some of the smaller players fall by the wayside.”
Bird is a global player that expects revenues to double in 2021 from a pandemic-hit 2020, and then double again to $ 400 million in 2022. with gross sales of $ 4.1 billion in 2019.
Bird’s proposed merger – which will lead to a shareholder vote on Switchback II on November 2 – values the company at $ 2.3 billion, about 20% below January 2020 price, according to startup data platform PitchBook. Lime, too Global player, recorded a decrease in value of almost 80% compared to the previous year during a financing round in June 2020.
While the pandemic hurt ratings at the top, a Reuters analysis found that many smaller e-scooter providers have cut funding as well.
“There are a lot of companies that can’t invest in hardware, invest in security, or invest in training,” said Wayne Ting, CEO of Lime, one of whose investors is Uber. Lime acquired the Jump micromobility unit from Uber.
The current environment is a long way from 2017, when electric scooters accessed via smartphone apps first appeared in large numbers. A spate of new vendors has created “Wild West Competitions” as mostly European cities host an unlimited number of vendors, said Candice Xie, CEO of Chicago-based Veo, which operates in more than 40 US cities.
“A lot of companies are racing down to gain market share,” she said.
Vehicles were dumped on roads from Detroit to Paris and the term “Scooter-Blight” was born.
Early rental scooters “were consumer grade and not built for heavy use,” said Fredrik Hjelm, CEO of Voi Scooters. Stockholm-based Voi operates almost 100,000 scooters across Western Europe.
NEW SHERIFF IN TOWN
Now cities and states have tightened the regulations, creating tough tendering procedures for licenses in order to limit the number of scooter suppliers.
Copenhagen temporarily banned all scooter suppliers earlier this year while rewriting its regulations.
Some U.S. cities, including Columbia, Missouri, and Winston-Salem in North Carolina, have allowed e-scooter vendors to return with more supervision after they have been expelled.
Big scooter suppliers say that licensing some big players with a track record guarantees better service and allows them to operate larger fleets profitably.
“This has become a low margin, top-up game,” said Voi’s Hjelm. “And it’s much better to have fewer, more dense operators.”
Great Britain has started test projects for e-scooter providers in certain cities – but with speed restrictions and users must have a driver’s license.
“We are determined to make sure that safety is at the heart of our test and that it works for everyone,” said Helen Sharp (OTC :), director of transportation for London’s e-scooter test for three operators: Lime, Tier and Dott .
To meet the requirements of London, Tier, based in Berlin, has developed software that prevents its scooters from driving on certain busy roads.
“You could maybe just push it, but it wouldn’t be easy,” said Tiers’ city chief for Great Britain and Ireland, Georgia Yexley.
But better scooters and software drive up costs.
Fred Jones, Tier’s regional general manager for Northern Europe, said the company’s scooters can now last five years and have 83 interchangeable components to extend their life.
“It costs a lot, not just the scooter, but the parts and skilled workers to maintain it,” Jones said. “If you don’t do this right, the economy won’t work.”
Ensuring this is the key to funding.
Silicon Valley venture capital firm Autotech Ventures avoided micromobility firms until this year when it bought its way into Chicago’s Veo and another unidentified firm.
“Veo has taken a disciplined approach to growth, achieving impressive unit economics and much higher profitability than virtually any of its competitors,” said Dan Hoffer, managing director of AutoTech Ventures.
According to PitchBook, micromobility venture capital deal activity fell from $ 4.6 billion in the same period in 2020 to $ 1.4 billion in the first half of 2021.
Another problem for aspiring e-scooter providers is that insurers view e-scooters as fundamentally more dangerous than bicycles or cars. “Drivers are particularly at risk, more so than cyclists,” said Martin Smith, engine technical damage manager Aviva (LON :), a large UK insurer that does not cover e-scooters.
Regular car insurers like AXA UK, Admiral and Unipolsai avoid e-scooter providers and leave them to specialized providers like Zego. Bird CEO VanderZanden said to get lower insurance rates it uses data from the 300 cities in which it operates globally and highlights the benefits of scaling.
It has also added physical safety features like a double brake and developed software to put irresponsible drivers out of service – everything runs on its own operating system.
“Having amazing vehicles is one thing,” said VanderZanden. “But you need data to show insurance companies that this works.”