Micro mobility: A new beginning or a dead end?
Recently came across this news article on Vice about “JUMP” and how getting acquired by Uber led to JUMP bikes being destroyed by the thousands.
— https://www.vice.com/en_us/article/5dz94x/uber-acquisition-jump-bikeshare-destroyed-thousands-of-bikes
This instantly struck a chord and I realized that I had done similar research about Micro-Mobility a year back. I reached out to my mate allgtr — Gaurav Chauhan who has been quite active in this space to discuss further on this issue.
This prompted us to further drill down and pull some key artifacts about what Micro mobility is all about and what holds for it in the future.
Bird is the fastest startup ever to reach a $1 billion valuation
An excerpt from an article — June 15, 2018
“Electric scooter startup Bird is the fastest company to reach a valuation of $1 billion.
Bird, one of many scooter startups currently sweeping the US, was last valued at $400 million after closing $100 million in series B funding in early March. In late May, Bird was reported to be raising $150 million in series C funding led by Sequoia Capital, at a $1 billion valuation.
People familiar with the deal told Quartz that at least three investors involved in that round — Sequoia, Accel, and Tusk Ventures — have already signed documents and wired money to Bird.”
Cut to 2020 (Covid-19 — The disruptor)
The micro-mobility services seem to be on the death bed. For most companies, the uptake has fallen to a single digit. The crisis has exacerbated the issues which were hidden from the beginning.
Not only the crisis led to a massive decline in both traffic and the scooters deployed, but it is also expected to change customer behavior in the long term. The big question is is that will these companies survive the crisis? Will the trend now shift to owning the vehicle and not sharing? Do these companies need to look at alternative revenue streams?
The collapse in ride uptake during Covid19 crisis
Tier ( A german scooter app) is growing exponentially but what about the behemoths. This can also be attributed to the fact that Germany has not seen a rise in the number of cases as well.
Though we should look at what the future of apps is going to look like.
Before we begin to answer these question, we need to understand micromobility concept and its value chain better . Lets look deeper into Micromobility and understand — “what’s the buzz ?” and some other aspects.
1. Micromobility — what’s the buzz ?
2. Market Landscape
3. Hardware vs Software — Platforms lead the way
4. Business Scenarios
5. The Business Set-Up (Entry Costs)
6.. Question of Sustainability — Unit Economics of E-Scooter
7. Challenges — The road ahead…
8.. What’s in it for OEMs ? A threat or an opportunity
9. Conclusion
1. What’s the BUZZ: What is Micro mobility and why such an exponential rise?
Well, Micro mobility services offer a tantalizing solution to address the first-mile/last-mile problem and to shrink transit deserts. For example, Mobike, a dockless bike-sharing system in China, claims to have nearly doubled accessibility to jobs, education, and health care by targeting areas more than 500 meters from public transport in Beijing and placing their fleet to fill those gaps
Other benefits of Micro mobility include:-
→ Increase access to public transport
→ Reduce the number of cars on the road
→ Lower the environmental footprint
→ A convenient method of Transportation for short trips
→ Proven to be cost-effective for consumers
Source: https://www.cbinsights.com/research/report/micromobility-revolution/
https://www2.deloitte.com/us/en/insights/focus/future-of-mobility/micro-mobility-is-the-future-of-urban-transportation.html
Key benefits of Micro mobility:-
1. Increases access to public transport
2. Reduces the amount of cars on the road
3. Lowers the environmental footprint
4. Provides a convenient method of transportation for short trips
5. Has proven to be cost-effective alternative for consumers
2. Market Landscape
The Shared micro-mobility market could reach $300 billion to $500 billion in 2030. To put that into perspective it equals about a quarter of the forecasted global shared autonomous-driving market potential of roughly $1,600 billion in 2030
36.5 million trips were taken on station-based bike share, an increase of 9% from 2017
3. Platform Business Models in Micro Mobility
4. Business Scenarios of Micro mobility — Key players and activity
5. Business Set-Up (Entry Costs) for a Micro mobility Business
6. Question of Sustainability — Unit Economics of E-Scooter
Regulations:-
This looks probable provided the supportive ecosystem remains. But with rising uptake — the call of regulations are also growing louder and policymaker are beginning to take notice.
7. Challenges and the road ahead…
1.City Infrastructure: Micro mobility, in essence, is an ecosystem play.-
Lack of proper infrastructures such as sufficient bike lanes, the adoption of shared bicycles and scooters becomes difficult and even dangerous to the public. This is one reason micro-mobility has yet to take off in countries within Africa, as well as in India.
In India, startups are partnering with government and OEMs to use this gap to their advantage by aiding the system by acting as a feeder to larger services such as metros by employing B2G2C and B2B2C models.
2.Profitability: The biggest elephant among other elephants.
Though many Micro mobility companies raked in millions of dollars through investors, the effort is to achieve sustainable profitability.
It has been reported that Bird’s gross profit margin is only around 19 percent, as of October 2018. To improve these margins, Bird has been changing its pricing structure, even doubling its per-minute fee in some cities.
While Indian startups are also attracting significant investments, they face similar challenges. The focus, for now, is to reduce the burn rate(the rate at which the company loses money). For eg Bounce, a leading Mico- mobility player in India though grew its revenue by 2X in 2019, expenses grew by ~6x and losses by ~9X
Reducing the cost of Vehicle (Scooters) is one of the major initiatives to improve profitability. For eg Yulu’s tie-up with Bajaj is expected to lower the cost of a scooter by 30%.
https://inc42.com/features/what-the-financials-bounce-stumbles-on-losses-as-it-revs-up-growth/
3.Regulation:
As dockless bikes and scooters are still a very novel concept, most cities do not have proper regulations in place for these programs run, leaving governments scrambling to figure out how to deal with the sudden appearance of fleets of bikes and scooters popping up around their cities. For instance, in India, there are minimal regulations for low-speed Electric scooters( <25kmph). This allows easier onboarding of customers-as it reduces the document verification steps
The difference in Onboarding steps between E-scooter and conventional scooters
4.Hardware Health:
Fierce competition between micromobility startups has led to the flood of millions of dockless bicycles across the streets.
As bikes break, companies often don’t have the manpower in place to fix them promptly, resulting in frustrated users having to test several bikes before finding one that works properly. This increases the chances of accidents and impacts the user experience.
5.Commuter’s Negligence
Vehicles loading the abandoned vehicle is a common sight with these companies. This not only is an additional cost for the companies but also an irritant for the pedestrian.
In India, the above concerns presently limit the dockless system to only a few cities. Additional pick up for improperly parked vehicles, a nuisance to pedestrians and traffic police alike, add to the expenses. Fixed pickup spots are one of the measures to reduce this behavior.
A pick-up truck on duty
6.Weather:
For cities with harsher climates, like those in northern Europe, the adoption of shared bikes and scooters is not as viable. In the rain and snow, conditions become dangerous and accidents skyrocket. Plus, demand simply decreases when it is too cold to use unenclosed vehicles
8. The question for OEMs
9. Conclusion
Micro mobility Start-ups are still not making any money
As on July 11, 2019 — Bird lost nearly $100 million while revenue shrank sharply to only about $15 million. In the spring, it told people it was down to about $100 million in cash, even after raising more than $700 million over a year and a half.
Just as was the case with Uber and Lyft we can see that even new E-bike platforms are also burning cash and it does not look like they’d
be turning profitable anytime soon.
As was discussed in the Unit Economics study that the E-Bike Manufacturing Costs outweigh the returns which also shows in the financial performance of the E-bike companies.
Investors are putting their money where their mouth is
Essentially Micro mobility startups are running on the cash pile they raise during the funding rounds. Investors (VC funds such as Sequoia Capital, Bain Capital Ventures, Fidelity Ventures, Hinge Capital, etc.) do understand the Market Potential and focus more on the cash flows than the profits. The trend around Wall Street has been such that even companies who didn’t earn even a single penny in Profit can open an IPO.
Hence it will be too quick to negate the idea of the success of such disruptors and rather it becomes necessary for Auto OEMs to take action on how to counter these developments disrupting the value chain.
Post-COVID Era — while the crisis collapsed the revenue of the companies to single digits and imposed an additional cost (4–5%) of improving the safety ie regular sanitization, seat covers, etc. There are also green shoots
The era of social distancing is expected to increase the number of users. Also, existing users to avoid sharing their vehicles may use the vehicles for longer distances. This is reflected in the companies rolling out Long terms rental plans.
The companies are using the crisis to diversify the business. Share of logistics services in revenues previously ~10 % is expected to grow to 25%.
Will be interesting to see if these disruptors continue to tread along the growth or disrupt themselves in the process.
You can reach me out :
https://www.linkedin.com/in/shubhamtripathi-iimb/ or
shubham5strings@yahoo.in
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