After the start of the Wild West, scooter suppliers pursue the ladder to survive
LONDON, Oct. 14 (Reuters) – The era of meteoric growth in electric scooter companies is giving way to more selective, profit-driven expansion as they face tighter regulations, more demanding customers and suspicious insurers.
Severely injured by global coronavirus lockdowns last year, companies offering per-minute electric scooter rentals say ridership is reaching pre-COVID 19 levels among urban consumers keen to avoid public transport or taxis.
But that doesn’t mean the app-based industry is returning to the pre-pandemic free-wheeling world where “micromobility” companies were loosely regulated and raked in investor money.
Scooter companies now face cities that use licenses to limit the number of operators, consumers demand better software and vehicles, and insurers are wary of security risks.
This is driving costs and will push the low margin industry towards further consolidation. Some smaller vendors have already been bought out, including Boston-based Zagster, acquired by transport technology company Superpedestrian in 2020, and San Francisco-based Scoot, taken over by Bird Rides in 2019.
“You really need scale for the economy to work,” said Travis VanderZanden, CEO of Santa Monica-based Bird, which is set to go public through a merger with Special Purpose Acquisition Company (SPAC) Switchback. II Corp. “So I think we’re going to see some of the smaller players go down the drain.”
Bird is a global player who expects its revenue to double in 2021 from a 2020 pandemic, then double again to $ 400 million in 2022. That’s still low compared to a company of auto transport like Uber (UBER.N), which had gross revenues of $ 4.1 billion in 2019.
Bird’s planned merger – which will be put to a vote by Switchback II shareholders on November 2 – values the company at $ 2.3 billion, about 20% below its January 2020 price, according to the data platform. PitchBook startup. Lime, also a global player, saw its valuation drop by nearly 80% during a roundtable in June 2020 compared to less than a year earlier.
As the pandemic beat valuations at the top, a Reuters analysis found that it had also cut funding for many small electric scooter suppliers.
“There are a lot of companies that can’t invest in hardware, can’t invest in security features, and can’t invest in training,” said Wayne Ting, CEO of Lime, whose investors include Uber. . Lime has acquired Jump, Uber’s micromobility unit.
The current environment is far from 2017, when electric scooters accessible through smartphone apps first appeared in large numbers. A flood of new suppliers created “Wild West contests” as predominantly European cities welcomed an unlimited number of suppliers, said Candice Xie, CEO of Chicago-based Veo, which operates in more than 40 US cities.
“A lot of companies have rushed down to get market share,” she said.
Vehicles were thrown on the streets of Detroit in Paris, and the term “scourge of scooters” was born.
The first rental scooters “were consumer grade and were not designed for a high level of use,” said Fredrik Hjelm, CEO of Voi Scooters. Stockholm-based Voi operates nearly 100,000 scooters across Western Europe.
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Now cities and countries have tightened regulations, creating difficult bidding processes for licenses to limit the number of scooter suppliers.
Copenhagen temporarily kicked out all scooter suppliers earlier this year as it rewrites its regulations.
Some US cities, including Columbia, Missouri and Winston-Salem in North Carolina, have allowed e-scooter suppliers to come back with more scrutiny after they’ve kicked them out.
The major scooter suppliers claim that licensing a few major players with a track record ensures better service and allows them to operate larger fleets profitably.
“It has become a game of thin margins and scaling,” Voi’s Hjelm said. “And it’s much better to have fewer operators with higher density.”
Britain has started test projects for e-scooter suppliers in some cities – but with speed restrictions, and users must have a driver’s license.
“We are committed to making sure that safety is at the heart of our test and that it works for everyone,” said Helen Sharp, Transport for London’s electric scooter test manager for three operators: Lime, Tier and Dott.
To meet London’s requirements, Berlin-based Tier has developed software to prevent its scooters from accessing certain busy roads.
“Maybe you could push it, but it wouldn’t be easy,” said Georgia Yexley, UK and Ireland cities manager for Tier.
But better scooters and software increase costs.
Fred Jones, Tier’s regional general manager for Northern Europe, said the company’s scooters can now last five years and have 83 replaceable components to extend their life.
“It costs a lot, not just the scooter, but the parts and skilled labor to maintain them,” Jones said. “If you don’t do this right, the economy won’t work.”
Making sure they do is the key to funding.
Silicon Valley venture capital firm Autotech Ventures avoided micromobility firms until this year, when it bought Chicago’s Veo and another unidentified firm.
“Veo has taken a disciplined approach to growth, achieving impressive unit economics and significantly higher profitability than virtually any of its peers,” said AutoTech Ventures CEO Dan Hoffer.
According to PitchBook, in the first half of 2021, venture capital transaction activity in the micromobility sector fell to $ 1.4 billion from $ 4.6 billion during the same period in 2020.
Another problem for future electric scooter suppliers is that insurers view electric scooters as inherently more dangerous than bicycles or cars.
“Bikers are particularly vulnerable, more than cyclists,” said Martin Smith, technical manager of auto claims at Aviva (AV.L), a large UK insurer that does not cover electric scooters.
Regular auto insurers like AXA UK (AXAF.PA), Admiral (ADML.L) and Unipolsai (US.MI) are also avoiding electric scooter suppliers, leaving them to niche players like Zego. Bird CEO VanderZanden said that to get lower insurance rates, it uses data from the 300 cities it operates in around the world, highlighting the benefits of scale.
It also added physical security features like a double brake and software developed to keep irresponsible riders away from its service, all running on its own operating system.
“Having amazing vehicles is one thing,” VanderZanden said. “But you need the data to show insurance companies that it works.”
Additional reporting by Paul Leinert in Detroit, Andrea Mandalà in Milan and Muvija M. in Bengaluru Editing by Joe White and Mark Potter
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