The Future of Transportation: Are e-Scooters Over, Or Just Overhyped?

Google+ Pinterest LinkedIn Tumblr +

Scooters have taken cities, investors, and the press by storm: there are over 17,500 scooters on the streets of Los Angeles and 13,000 in San Diego. Meanwhile, the city of San Francisco capped scooters at 1,300 after receiving over 1,900 complaints due to Bird, Lime, and Spin dropping their scooters on the streets of SF without city permission. Both Bird and Lime are valued at over $1B, despite launching less than two years ago. But after reports of vandalism, theft, and high upfront costs started trickling out, investors are taking a step back. Are scooters really the future of transportation, or will they go down in history as a cautionary tale, a 21st century Tulip Mania?

NewtonX conducted a survey on scooters and the future of urban transportation to two populations: investors who have considered or are currently investing in a scooter company, and city transport officials in major U.S. cities. The insights, data, and conclusions in this article are informed by the results of this survey.

Scooter Mania: Why Scooters Aren’t Returning Upfront Costs

Just six months ago, Bird’s value doubled in under a month to $2B in two successive rounds, while its competitor Lime indicated it was seeking a $4B valuation. Now, both companies are scaling back: Bird shelved plans to raise several million more due to lack of investor interest, while Lime is now saying it will raise at a valuation of $2B – a significantly smaller round than it had previously pursued. Part of this pullback is likely due to VC wariness over a pending stock crash that many financial experts say will be due in large part to overvaluation of tech companies. However, part of it is also due to significant barriers that have cropped up: from vandalism, to theft, to pushback from city residents and cities themselves.

Each scooter itself costs about $500. NewtonX respondents indicated that on a good day, a scooter can return $20 or more in revenue, meaning that for a scooter to have good ROI it would need to be fully in use for 25 days — not even a full month. To investors, this looked like excellent ROI, hence a rush to invest in scooter companies such as Bird that were not even a year old.

Riders have fallen in the winter months, however, to an average of 7 per day — a number that reduces projected profit and therefore valuation. Additionally, modeling themselves after Uber, a company famous for “moving fast and breaking things” — a.k.a steamrolling through city regulations — Bird and Lime released their scooters on the streets without city approval, and were harshly rebuked. In San Francisco, over 500 scooters were impounded over the course of a single month for blocking driveways or being otherwise improperly parked, and both companies were passed over in the city’s scooter trial run.

Scooter companies have also dealt with significant vandalism, maintenance, and theft issues. This past summer, Scoot Networks, a small San Francisco scooter operator, won the right to trial 650 scooters in the city. Within two weeks of its launch, however, over 200 scooters had been stolen or vandalized beyond repair. Additionally, NewtonX experts reported that many scooters are not built for continuous use, and require maintenance after two months of regular riding, which significantly reduces ROI.

Scoot Networks is planning to release a lock that would require customers to lock their scooters to a rack when they’re finished riding, similar to CityBike, but the investment costs for the initiative are high. While it’s possible that vandalism and theft rates are higher in San Francisco than in other cities, it’s still telling to investors that these factors can reduce ROI.

Scooters Are One Solution Within A Larger Micromobility Movement

Despite much consumer scorn, city ire, and poor public reputation, scooters are a simple, easy, sustainable alternative to cars. As with any idea propelled into large-scale execution, there have been setbacks. If anything, though, these setbacks will fuel conversation over protected bike lanes, sustainable mobility, and livable urban spaces. The slowdown of investor frenzy is wise, but does not indicate that the future of scooters will be short-lived; if anything, it indicates that scooter providers need to slow down and build scalable business models that cities will be inclined to work with. The micromobility movement has gained traction as concerns over congestion and pollutants from cars gain momentum.

Both Bird and Lime have rolled out more-durable scooters, and are reportedly in talks with New York City over a trial run. Cities will need to establish guidelines and laws around scooter mobility, and protective lanes that allow cars, pedestrians, bicycles and scooters to coexist. The investor slowdown is a reflection of barriers, but not of a slowdown in the micromobility movement.

Share.

About Author

Comments are closed.