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Are E-Scooter Startups Making Money?

Money has been flowing into the e-scooter startups in the U.S., Canada and Europe. However, whether or not this hype will be supported by sensible business models is now making many investors wonder [1].

The electric scooter market is booming, and the major e-scooter actors are receiving sky-high valuations. Bird, who has been an early bird in this market, was recently valued at $2 billion and was reported as having a 19% profit margin on its scooters, according to The Information [2]. Yet, this number does not cover the cost for fleet management or advertising, which may be a game turner that “makes the entire business unprofitable” according to PBS.

E-scooters could make money with the right economies of scale. Increasing global market share and expanding the pool of customers are keys to success for the e-scooter startups. It is a battle in many U.S. cities where startups fight for the major share of the market. For example, in Santa Monica and California, scooters from Bird, Lime, Lyft and JUMP can all be found on the streets. Nevertheless, as more providers come into to the market, these “network businesses” are getting more solid as they scale up and people are more likely to turn to the app to tackle their mobility needs, according to Juan Matute, the deputy director of the UCLA Institute of Transportation Studies.

The current valuation of a company does not reflect how profitable the business actually is. Since investors are looking at the projected long-term profits, what are the next big things that may interest the investors? Bird is looking for solutions for scooters with a longer lifespan. Lime is launching a car-share program in Seattle. It sure looks like the startups are intensely scratching their heads trying to find new innovative business opportunities.

 

Personal comments

For all the sharing services, scale is everything when it comes to the question of profits. Quartz made a quick calculation on the unit economics of scooters based on the usage data of the scooter unicorn Bird in Santa Monica. The result said that Bird’s scooters earn $16 per day with an average of 5.5 trips daily (the average Bird scooter does 5-6 trips per day) [3]. This calculation does not include the costs for fleet management either. Although using crowdsourcing for charging is a common approach for the scooter startups to save some management costs (the similar approach is taken by the newly launched Swedish scooter startup VOI), we still lack a solid number to conclude how profitable the business is today. On the other hand, whether people in different parts of the world consider the benefits the scooters bring to their daily mobility is worth the cost is a more interesting question.

 

Written by Anne Faxér, RISE Viktoria.

 

Sources

1. 2018-11-15. The electric scooter market is zooming. Will profits catch up?  

2. 2018-10-23. Inside Bird’s Scooter Economics.

3. 2018-07-11. Simple math shows how scooters could make big money.