How micromobility operators can unlock a $300B industry

·4-min read

Compared with cars, e-scooters are a lower-carbon, quieter and cheaper means of transport that can make a positive impact on urban mobility and the environment. However, despite their promising potential, the majority of the urban population perceives them either as toys or a public safety hazard.

The amount of venture investments in the industry is correspondingly meager: Since 2010, shared micromobility received only $9 billion in investments globally -- compare that with the $72.3 billion raised by U.S. startups in the third quarter of this year alone. If we want to move toward a truly sustainable urban environment where people en masse choose low-carbon micromobility transport over cars, we need to find ways to make this business profitable.

Initially, e-scooter operators were competing for the attention of riders by putting as many e-scooters as they could on the market, and physical presence meant success. As cities started to adopt regulations and grant licenses, the operators’ focus shifted to getting approvals from city officials because licenses secured their access to end consumers and gave confidence that allowed for long-term planning.

The licenses also eased the task for investors, and the startups that secured licenses saw a surge of funding. For instance, in 2021, players like Tier, Voi and Dott raised a cumulative $490 million.

This sends a clear message to other e-scooter operators that aim to compete on the market: If you want to raise investments and grow, claim a place in the cities first. Currently, this applies predominantly to Europe, which has a better infrastructure and serves as a test site for micromobility transport and business models.

However, when micromobility at large proves efficient for urban communities, these practices will likely expand to other regions such as the U.S., where major cities are already building more bike lanes. Considering that by 2030 global micromobility is expected to become a $300 billion to $500 billion industry, it’s well worth the effort.

Merely winning a tender, though, isn’t enough because the licensed operators move on to the next round of competition. They have to meet the expectations of both end consumers and investors -- that is, to achieve profitability while offering supreme product and product experience.

So far, the e-scooter sharing business has not proven profitable, and the existing business models have lots of room for improvement. The most evident issues are expensive charging and operations that may account for 60% of costs, so even a slight optimization here would be beneficial.

So what can we do?

Operations may vary between companies, but charging scenarios are few. Micromobility operators either collect vehicles manually at the end of the day to bring them to charging warehouses or manually swap dead batteries for new ones. Both of these involve manual labor, and some players have started offering solutions that aim to cut this cost.

Taiwan-based e-scooter manufacturer Gogoro launched swapping stations that essentially pass charging tasks on to riders. So far it’s compatible only with two e-scooter brands. German operator Tier chose a similar approach and recently rolled out Tier Energy Network: Now, Tier riders can swap batteries themselves using PowerBoxes installed at local partner shops. However, if an operator goes for swapping, they have to have at least two batteries in stock for every e-scooter in their fleet, and battery cells are the most expensive hardware component.

Besides, having to change a route to swap batteries at brand-specific locations might worsen product experience for some consumers and limit an operator’s user base, which is essential when the competition is tight.

Moreover, when the demand for micromobility increases, the stations will need to be able to fit a large number of vehicles simultaneously. It will create a demand for universal infrastructure. Companies such as Kuhmute and PBSC Urban Solutions have partially addressed this issue and developed universal chargers compatible with various e-mobility vehicle types and brands, though many such solutions are electric contact-based and therefore can accommodate only a limited number of vehicles at a time. Besides, stations are prone to contact oxidation in two to three months and change the city landscape.

In that case, a natural next step would be to roll out a one-type-fits-all charger with a substantially bigger parking capacity. Though once we start discussing parking spaces, cities come into play as key stakeholders. They already have to convert plenty of land suitable for residential development into spaces for cars to park, and they’ll need to also assign it to e-scooter charging -- both swapping stations and charging docks have overground hardware.

Some players have started addressing this issue, and such products already exist in the electric car domain. For instance, U.S.-based company WiTricity has developed a ground charging pad that charges cars wirelessly and over-the-air once vehicles are parked over it. The charger doesn’t have any overground hardware, so it can double as a regular road or sidewalk. The absence of destroyable parts also serves as vandalism protection.

If applied in the e-scooter segment, this technology can improve unit economics by saving on extra batteries and manual labor required to swap or plug them in. Such standardization would be beneficial for end consumers and micromobility companies alike.

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