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After Wild West start, scooter providers chase scale to survive By Reuters


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© Reuters. Georgia Yexley is the UK and Ireland chief of cities for Tier. She prepares to show an e-scooter at London’s Transport Museum, London on August 25, 2021. Picture taken August 25, 2021. REUTERS/Nick Carey

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Carolyn Cohn, Nick Carey

LONDON, (Reuters) – The era when electric scooter companies enjoyed rapid growth is over. However, they are now focusing on profit as they have to comply with stricter regulations and be more customer-focused.

Global coronavirus lockdowns in 2013 caused severe damage to e-scooters’ ridership. Companies that offer e-scooter rental by-the minute say the number of urban commuters who are looking to cut out taxis and public transport is back to its pre-COVID 19 levels.

However, this doesn’t necessarily mean that the app-based sector is returning to pre-pandemic freedoms.

Cities are now licensing scooter firms to restrict the number, with consumers demanding better software, and insurance companies being cautious about safety.

The industry’s low margin sector will see increased costs, which is leading to further consolidation. Some of the smaller providers are already being bought up. These include Zagster in Boston which was purchased by Superpedestrian in 2020 and Scoot in San Franciso, which Bird Rides took over in 2019.

Travis VanderZanden (CEO of Bird), Santa Monica, says that it takes scale for economics to work. Bird will go public through a merger of special purpose acquisition companies (SPAC) Switchback I Corp.

Bird expects to increase its revenues by doubling in 2021 after a pandemic in 2020. Then, it will double to $400 millions in 2022. It is still a tiny amount compared to Uber (NYSE : ), which has gross revenues of $4.1billion in 2019.

Bird’s merger plan – which will undergo a Switchback I shareholder vote on Nov. 2) – places the company at $2.3Billion. This is about 20% lower than its January 2020 value, according to startup data platform PitchBook. Lime, another global player, had its valuation drop by nearly 80% after a June 2020 round of funding. This was a significant increase from the one it received a year prior.

Reuters analysis shows that while the pandemic ravaged valuations at top levels, it cut funding to many smaller escooter companies.

Wayne Ting is Lime’s CEO. Uber’s investors are among them. Lime purchased Uber’s micromobility division Jump.

Today’s environment is far different from 2017. In 2017, electric scooters could be accessed via smartphones. CandiceXie (CEO of Veo in Chicago), said that the flood of new suppliers created “Wild West” competitions as primarily European cities housed unlimited number of vendors. Veo operates in more 40 U.S. locations.

She said that “a lot of companies raced towards the bottom to gain market share.”

From Detroit to Paris, vehicles were left on the streets. Thus was “scooter plague”.

Fredrik Hjelm, CEO of Voi Scooters said that early rental scooters were “consumer grade” and weren’t designed for high levels of use. Nearly 100,000 scooters are operated by Voi Scooters in western Europe, with a Stockholm base.

NEW SHERIFF IN TOWN

These days, countries and cities have tightened their regulations. They now require strict bidding to obtain licenses for scooter providers.

Copenhagen has temporarily removed all scooter operators from its premises earlier in the year as it revises its regulations.

Columbia, Missouri and Winston-Salem (North Carolina) have permitted e-scooter operators to be re-evaluated after they were expelled.

According to large scooter companies, granting licenses to only a handful of major players who have a track record guarantees superior service and allows them operate larger fleets more profitably.

Voi’s Hjelm stated that “this has been a game with slim margins, scaling up” It’s better to have less operators but more density.

Britain’s pilot programs for escooter service providers have been launched in certaine cities. There are speed limitations and the requirement that users hold a driver’s license.

“We are determined to ensure safety is at its core and that it works for all,” Helen Sharp (OTC) said. She was the head of Transport for London’s e-scooter trial for Lime Tier and Dott.

Tier Berlin has designed software that stops scooters from accessing roads and busy streets to meet London’s requirements.

Georgia Yexley, Tier’s UK/Ireland head of cities said, “You may just be able push it, but that wouldn’t make it easy.”

However, software and scooters with better features drive up prices.

Fred Jones, Tier’s general manager in northern Europe said that Tier’s scooters now can last up to five years. They also have 83 interchangeable parts, which extends their life expectancy.

Jones stated that “that costs a lot not only the scooter but also the parts and skilled labor to service it.” It’s impossible to get the economics right if that’s not done correctly.

It is crucial to ensure they are funded.

Autotech Ventures in Silicon Valley was a venture capital firm that avoided micromobility until the purchase of Chicago’s Veo, an unidentified firm.

Dan Hoffer (Managing Director at AutoTech Ventures) said, “Veo has adopted a disciplined growth approach. It achieved impressive unit economics. And much higher profitability.

PitchBook reports that in 2021, venture capital deals in micromobility fell by $1.4 billion to $4.6 billion in comparison to the 2020 period.

WARY INSURERS

A problem that e-scooter companies may face is the perception of e-scooters by insurers as more dangerous than cars or bikes. Martin Smith, motor claims manager, said that riders are more vulnerable than cyclists. Aviva (LON) is a UK-based insurer which does not provide coverage for e-scooters.

AXA UK (or Admiral) and Unipolsai, regular motor insurers, also steer clear of e-scooter vendors, leaving these to the specialist providers like Zego. VanderZanden is the Bird CEO. He said that in order to lower its insurance rates, it used data from all 300 countries it has operations.

Additionally, it has developed software to help riders who are not responsible use its services.

VanderZanden stated, “Having incredible vehicles is one thing.” VanderZanden said, “But insurance companies need to see data.”



Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.