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Deep Dive: E-Scooter Sharing in 2021

For many of us living in major cities, the everyday presence of e-scooters scattered around the urban environment makes it difficult to recall that they are, in fact, a very recent phenomenon. It was merely 4 years ago in 2017 that Bird and Lime, the original pioneers of this as a form of shared-mobility, started operations in California – before quickly expanding across the US. In Europe, Tier and Voi only began their operations in 2018.

Many of these initial rollouts used consumer-grade scooters that more closely resembled toys, rather than commuter vehicles with adequate safety features (like working brakes) and rarely lasted more than a few months on the street – that is if they didn’t end up vandalized or thrown in bodies of water much sooner. They also often operated in regulatory grey zones, as cities had no applicable rules for such vehicles or ‘free-floating’ services. This resulted in a spate of negative press around issues such as misuse of the devices, injury lawsuits brought by both users and pedestrians alike, not to mention their poor environmental footprint (due to short unit lifespans). There were even serious questions about whether such a business model could ever be profitable.

Where are we now?

So fast forward to 2021, what’s changed? A fair bit it seems. There are now over 1000 provider/city combos of free-floating micro-mobility services in Europe alone, largely dominated by e-scooters. The hardware of the scooters themselves have improved by leaps and bounds. Compared to the original devices that were hitting the streets in 2017-2018, today’s vehicles are customed made for the rough and tumble of the sharing economy. Many cities have implemented e-scooter specific policies, even licensing frameworks, that specify maximum allowable speeds, parking conditions and what types of areas or surfaces the vehicles can be used on. Some key hold-out cities such as London and New York are on the verge of starting e-scooter trials. So it’s not only the industry that has matured, but cities and regulators too. In light of this, funding models have also shown signs of maturity, shifting from venture capital towards debt-financing by established investment banks – reflecting a lower risk rating for the overall business model. But many issues continue to plague the sector, such as badly parked scooters and unsafe rider behaviour on sidewalks.

Let’s take a more in-depth look at these areas bit by bit.

Policy and regulation

Cities as well as national governments have taken proactive measures to bring e-scooters in from the regulatory grey zone. In France, the ‘Law of Orientation on Mobilities’ introduced a specialised category for micro-mobility vehicles, such as e-bikes and e-scooters. This sets an overarching framework which applies to e-scooter use (whether shared or personal devices) across the whole country – and in France’s case, regulates things like the maximum speed limit, its use on certain types of surfaces (bike paths and roads with speed limits up to 50 km/h), minimum age of users, hardware features such as brakes and reflectors, and whether helmets must be worn.

However, in most countries (including Sweden) where there are no national frameworks regulating e-scooters in force yet, cities have been forced to develop frameworks themselves. Even where national frameworks exist for e-scooter use, cities can still impose stricter requirements – such as lower speed or age limits. The recent trend for a lot of cities around the world have been to adopt a vendor licensing system, usually in the form of a tender process that restricts the market to a selected number operators for a period of time, like the case in Paris, London and New York. An alternative approach (like in Malmö, Gothenburg and Stockholm) has been instead to keep the market open to new entrants, but to charge a fee per e-scooter unit operated by each vendor.

Many of the major e-scooter vendors appear to support the vendor licensing approach, as it provides them with regulatory certainty – meaning not only clear rules to follow but a partnership with the city authority to try and solve problems together. Both Voi and Lime boast of high success rates in city tender processes of above 80%. Voi’s chief executive wrote in an article “Without licensing or rules, there is only so much an e-scooter operator can do to encourage and promote good rider behaviour, safe and tidy parking, and ultimately sustainability”. Tier has gone even further by publishing a press release that specifically calls on Swedish cities to copy the procurement approach of other cities like Paris to be better equipped at regulating the sector.

While the major difference in the regulatory space between 2017 and 2021 is that cities now have the tools and frameworks to manage e-scooter issues, a lot of those actual issues themselves have not changed. Top two on the list still appear to be improperly parked devices, and both rider and pedestrian safety. This has led some cities to force operators to abandon the free-floating model completely in favour of designated parking areas, while others still allow free-floating in theory but have forced operators to geofence large number of areas from being used for parking. Cities have also been fining operators for instances of improperly parked devices. When it comes to regulating the behaviours of their users, the operators themselves have been more inclined to use the carrot approach, such as offering discounts to riders for parking at ‘preferred’ locations. The problem has however appeared so intractable, that some vendors are even experimenting with functions that allow the scooters to move and re-park themselves.   

When it comes to pedestrian and rider safety, regulating the speed of vehicles as well as their use on areas heavily trafficked by pedestrians are the main headaches. Moscow recently introduced geofencing that slows e-scooters down to 15km/h in certain areas of the city. In many cities, e-scooters have been banned from use on sidewalks altogether. Operators are even coming up with camera systems paired with AI used for detecting if the scooter is being used on a sidewalk or not. Some cities have curfews at night designed to reduce the incidence of people using the scooters while drunk. An issue currently being heavily discussed in the UK trial of shared-scooters is the need to implement electronic noises so that they do not pose a threat to members of the vision impaired community. A number of operators in the UK are reportedly testing devices and audio files for this.  

Hardware and functionality

Compared to the 12kg consumer scooters made by Xiaomi and Segway that were used by so many sharing startups barely 4 years ago, the majority of devices used today are much larger form factors typically weighing over 20kg each. They are almost SUV-like in size when seen next to the originals. These tend to be custom designed by in-house teams at each of the scooter operators, and then outsourced to a limited number of manufacturers such as OKAI, Segway and Fenix for production. Key drivers behind this shift to custom development of scooters are to increase safety, unit robustness and longevity, ride quality and product differentiation.

Major recent hardware improvements that almost all the brands have adopted are more rugged suspension systems, larger wheel sizes (from 8 inch previously to 12 inches), more powerful motors, bigger batteries, redundant brake systems, turn-indicators and improved kickstands. The body of the scooters themselves have also become a lot more robust. According to Voi, their latest 4th generation model is designed to last five years or more. Even if the models in real life last only half as long as this claim, this would still be an order of magnitude longer than the consumer models that sparked the beginning of this trend – which reportedly lasted between just one to three months for Bird’s models back in 2018.   

However, many of the innovations are not just physical, but electronic or IoT and software-enabled. For example, vehicle diagnostics and fault detection systems designed to proactively identify and prevent possible issues before they turn into problems. According to Bird, every one of their newer generation scooters checks for faults “millions of times per day” for up to 200 sensory inputs including if the vehicle has fallen over, abnormal battery temperatures and sticky brakes. More experimental innovations include self-driving or remote-driving features that could enable scooters to park themselves or be moved to another area remotely. Voi’s research into a pedestrian and sidewalk detection feature using AI vision has also recently been in the news, as well as equipping some of their fleet with noise and air quality sensors.

Swappable batteries also appear to be a crucial new hardware trend, enabling significant efficiencies in managing the charging aspect of fleet operations. New units with swappable batteries are now used by most of the major vendors (Lime, Tier, Voi, Dott and Bolt) with the exception of Bird. This means vehicles only need to be packed into the back of vans when they require servicing or re-positioning, skipping the time-consuming and labour-intensive step of charging them back at a base.     

Business models

On the business model front, the changes in recent years have been just a significant as the hardware upgrades. Four major themes emerge here concerning the workforce, a focus on profitability, pricing structures and platform integration.

The whole industry has seen a dramatic shift away from an almost complete reliance on gig-workers to charge, repair and redeploy scooters in the early days. So rife was this practice, that it gave rise to the term ‘birding’ (named because of the vendor Bird) to refer to the practice of collecting scooters for quick buck. The internet was even awash with articles about the competitive and cut-throat nature of this particular niche of the gig economy. However, hardly any of the major e-scooter operators still rely on gig-workers, instead they now directly employ operations teams in-house supplemented by the use of logistics contractors – particularly during the summer months when usage is the highest. This professionalizing of the workforce has been a key selling point highlighted by many of them trying to win over cities for tenders.  

Gone also are the days of expansion at all cost. With electric scooters now already deployed in many of the world’s major cities, the focus has shifted to profitability. This shift has also been accelerated by the corona virus pandemic, as lowered ridership during the first half of 2020 placed greater pressure on the bottom lines of many operators. This led to operators such as Lime pulling out of some cities where the path to profitability was considered to be too far way in order to focus on higher priority markets. Indeed, last year both Voi and Tier publicly claimed to have been profitable in June, whilst Lime achieved positive EBITDA in the three months to September. The Singapore headquartered Beam with operations in Malaysia, South Korea, Australia, New Zealand and Taiwan also reported profitability. Meaning these companies have achieved (or partially achieved) a feat that many commentators were still seriously doubting to be possible at all for e-scooters just a couple of years ago.   

On pricing structures, we’ve also seen a business model shift amongst some providers who now offer daily, weekly or monthly subscription plans that gives users almost unlimited access to e-scooters during that period for a flat fee. This shift indicates that there is indeed demand for e-scooters as a regular and reliable mode of transport for commuting and that the devices are not just used by tourists or for joy rides.

Lastly, more and more e-scooter companies are starting to wonder if there may be more value in the ‘access’ that they have to a large user base, rather than in revenue from e-scooters themselves. Lime has stated that they don’t just want to be just a scooter company; and that they see themselves as a ‘platform’ for different kinds of micromobility. This is likely the very same logic that enticed all three ride-hailing giants Uber, Lyft and Bolt to get into the e-scooter business as well. Basically, providing e-scooters can be thought of as a form of customer acquisition by getting people to download your app. Once they’ve done that, they can integrate all manners of other services into that app to try and offer to their users – whether it’s other mobility services like ride-hailing or food on demand.  

Conclusion

E-scooters are looking like they are here to stay. After pulling back and consolidating markets at the start of the corona crisis, they are now expanding again – but this time beyond capital cities and into tier 2 and tier 3 cities. In some cases, even while making a profit. The capital markets are taking notice, with Tier recently having recently secured a debt facility from investment bank Goldman Sachs. This means that the e-scooter business is no longer seen as just the risky, fanciful playground of venture capitalists, but something that more conservative institutions are willing to get behind and back.

Looking further ahead into the future, there are also suggestions from some policy corners that instead of cities charging vendors to operate, they should in fact subsidise e-scooters. This argument is not as wild as it sounds, considering that many cities did (and continue to) subsidise bike-sharing programs – which essentially serve the same micro-mobility roles as e-scooters. However, this seems incredibly unlikely for the meantime from the point of view of social acceptance. Until the e-scooter sector along with cities sort out the key issues of unsafe rider behaviour around pedestrians and improper parking – e-scooters will continue to be predominantly seen as something cities have to ‘manage’ as opposed to something they should pay money to ‘offer’ to their inhabitants.

Written by Bobby Chen
RISE Mobility & Systems (Elektromobilitet)