Draft · 9 min read
Urban transport has been a problem that we have been trying to solve since the emergence of first Cities, yet somehow it has always managed to stay one step ahead of us. But the arrival of “New age Micro-mobility solutions” promises a fresh approach to solve age-old problem ( Video conferencing enabled work-from-home being another one ).
Being in the Sustainable Solutions space, I keep a close watch on any the trends and disrupters in this space. A rise of multiple Micro-mobility companies and adverse impact on them post COVID-19 led me to reach out to my mate Shubham Tripathi who is an expert in Mobility space to further discuss this.
We drilled down and pulled some key insights about Micro-mobility and what holds in the future.
Rise and Rise!
Bird is the fastest startup ever to reach a $1 billion valuation
“Electric scooter startup Bird is the fastest company to reach a valuation of $1 billion” An excerpt from an article — June 15, 2018
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: Post-COVID Era
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 in 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 questions,What challenges do these companies face ? Can they survive the crisis? Will the trend now shift to owning, not sharing?
Before we begin to answer these questions, we need to understand the micro-mobility concept and its value chain better. Let's look deeper and understand “what’s the buzz ?”
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
1. What is Micro mobility and why such an exponential rise?
It refers to transportation by light-weight vehicles with distance within 10 Kms.
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
2. Shorter distance, So what?
The shorter range with better availability comes with many advantages :
1. Increased access to public transport
2. Reduction in the amount of cars on the road
3. Lower environmental footprint
4. More convenient at transportation for short trips
5. More Cost-effective alternative for consumers
3. Where we are at?
The Solutions fill a much-needed gap in present-day transportation and have caught the imagination of customers and investors alike. 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
4. Business Models in Micro Mobility
Platforms lead the way
It is the platforms (service providers) who have gained the investor confidence over the hardware manufacturing OEMS.
5. Skin in the game.
Value chain and Key players
6. How is it Done?
Business Set-Up (Entry Costs) for a Micro mobility Business
7. Show me the Money!
Unit Economics of E-Scooter
7. A long road full of potholes and speed breakers…
Key issues that lie 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%.
3.Regulation- Get off the walkway!
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: “Handle with care”
Fierce competition between micro-mobility startups has led to the flood of millions of dockless bicycles across the streets.
As bikes break, companies have to invest in the manpower in place to fix them promptly, to avoid frustrated users that have to test several bikes before finding one that works properly. This also increases the chances of accidents and impacts the user experience. This would emerge as a key problem as we go-ahead
5.Commuter’s Negligence: “Handle with care,NOT”
Vehicles loading the abandoned vehicle is a common challenge for these companies. This is an additional cost for the companies and also an irritant for the pedestrian.
In India because of the above concern, companies 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.
8. The Opportunity for the OEMs
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 presently outweigh the returns which also shows in the financial performance of the E-bike companies.
COVID led demand fall and rise in cost of doing business
While the crisis collapsed the revenue of the companies to single digits and imposed an additional cost (4–5%) of improving the safety though regular sanitization, seat covers, etc.
But, there are also green shoots
Social distancing as a driver
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.
Tier ( A german scooter app) is growing exponentially during COVID. This can be attributed to the fact that Germany has not seen a rise in the number of cases, but it does indicate a trend that other countries may also observe.
Fuelling the e-commerce drive
The pandemic led an exponential rise in the e-commerce companies has presented an opportunity for diversifying their business. Share of logistics services in revenues which used be within ~10 % is expected to grow to 25%.
Investors are putting their money where their mouth is
Micro mobility startups are running on the cash pile they raised 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 but are focused more on the cash flows than the profits.
While the trend around Wall Street has been such that new companies who yet to show any Profit can open an IPO, it will be too quick to negate the idea of the success of such disruptors. It becomes necessary for Auto OEMs to take action on how to counter these developments disrupting the value chain.
Will the disrupters disrupt or themselves get disrupted, will be an interesting trend to watch from here.
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