THE PROMISE and PITFALLS of E-SCOOTER SHARING by Daniel Schellong, Philipp Sadek, Carsten Schaetzberger, and Tyler Barrack

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THE PROMISE and PITFALLS of E-SCOOTER SHARING by Daniel Schellong, Philipp Sadek, Carsten Schaetzberger, and Tyler Barrack THE PROMISE AND PITFALLS OF E-SCOOTER SHARING By Daniel Schellong, Philipp Sadek, Carsten Schaetzberger, and Tyler Barrack f market growth were vehicle Why the E-Scooter? Iacceleration, the humble electric Still in their infancy, the biggest names in scooter—the latest answer to urban e-scooter sharing—Bird and Lime—have mobility—would be a Ferrari. Since their each amassed hundreds of millions of debut (by US-based Bird) in the fall of 2017, dollars in funding. Many more startups shared e-scooters are now in service in have raised more than $20 million each. hundreds of cities worldwide, and more (See Exhibit 1.) How to explain this launches are planned in the coming explosion and the forecasts of eye-popping months. A dozen e-scooter startups have growth worldwide? already attracted more than $1.5 billion in funding, and we estimate that the global The rapid rise of shared mobility—through market will reach about $40 billion to ride hailing, car sharing, and shared public $50 billion by 2025. bicycle systems—paved the way for e-scooters, responding to the public’s But several factors will put the brakes on appetite for cheap, convenient, and flexible e-scooter growth, if they haven’t already. ways to quickly get around increasingly Right now, the unit economics don’t add congested cities. But even beyond the up, and with so crowded a field, consol- practicality of e-scooters is the element of idation is inevitable. So is greater reg- fun that they offer: anyone—whether an ulation: as e-scooters proliferate, cities executive in a suit or a student in jeans— need to sort out traffic rules, public safety, can enjoy feeling like a little kid again. parking, permits, and liability issues. The big question—for service providers, in- Roughly 35% of all personal trips cover vestors, urban planners, and consumers distances of less than 2 kilometers (km), alike—is whether e-scooters can overcome and 75% of them amount to less than these hurdles and become a staple of 10 km. E-scooters are typically used for urban micromobility. trips from 0.5 km to 4 km, the equivalent of Exhibit 1 | A Dozen Contenders Are Fighting Over a $40 Billion to $50 Billion Market Funding Estimated global market by 05 Company HQ Founded ($millions)1 ($billions) Lime2 San Francisco 0 765 Europe 12-15 Bird Santa Monica 0 415 USA 3 Grow Mobility Mexico City 0 150 12-15 Flash Berlin 0 66 China Voi Technology Stockholm 0 47 6-8 Scoot Networks San Francisco 0 46 Rest of the world 10-12 Tier Mobility Berlin 0 31 Skip San Francisco 0 31 40-50 Dott Amsterdam 0 23 How we calculated Target population of region Blue Duck San Antonio 0 23 the estimated market x number of trips by average user potential for each x average local price Wind Mobility Berlin 0 22 region Estimated market potential Sources: Crunchbase; Pitchbook; TechCrunch; BCG analysis. Note: This list includes e-scooter-sharing startups with reported funding of more than $20 million, but it excludes corporate ventures (such as Lyft Scooters or Daimler’s Hive) and startups bought up by other firms (such as JUMP and Spin, acquired by Uber and Ford, respectively). 1As of April 1, 2019. 2Lime originated as a bike-sharing company. 3Grow Mobility was formed in 2019 through the merger of Mexico-based Grin (founded 2018) and Brazil-based Yellow (founded 2017). 4To estimate the number of trips (standalone and intermodal) by the average user, we accounted for such factors as trip purpose, e-scooter availability, weather, and general consumer preferences. Target population estimates factored in age, geography, and fitness level. The average local price represents the average use fee plus average minutes within the given region. walking for 5 to 45 minutes. (See Exhibit 2.) The Scooter-Sharing Market Is In theory, therefore, e-scooters could be Big but Uncertain used for a large proportion of in-town Ride-hailing services have already demon- travel. E-scooters fit the bill for other strated how quickly shared-mobility modes reasons as well: they’re cheaper than can be adopted by the public. In 2015, for hailing a ride-share vehicle, you don’t have example, only 15% of US adults had ever to hunt for a parking space, and no used Uber or Lyft, but by 2018, that figure sweating is involved. They can also be had risen to 36% overall (45% for city paired with other mobility modes dwellers). (especially public transportation), thus making them a handy solution for traveling Our estimate of the global market for the first and last miles from home to shared e-scooter rides—potentially station. $40 billion to $50 billion by 2025, as Exhibit 1 shows—would be about 15% of the size E-scooters have their limitations, however. of the market for automotive-based on- They don’t perform well in hilly areas or demand mobility for that year, according to on brick-lined streets; they’re ill-suited for our calculations. Given that shared inclement weather; and riders have e-scooters are generally used more for nowhere to stow groceries or other private modes and for shorter trips, they belongings. E-scooter-sharing providers are will likely expand rather than erode the already in discussions with some existing market for on-demand mobility. manufacturers, including Xiaomi and Segway, about next-generation product Still, for all the advantages that e-scooter- changes that would address these needs. sharing offers, its mass adoption is hardly a Among the most important modifications certainty. For one thing, there may not be are stronger engines and more durable sufficient consumer demand, particularly construction. in cities with populations of less than Boston Consulting Group | The Promise and Pitfalls of E-Scooter Sharing 2 Exhibit 2 | E-Scooters Are Best Suited for Shorter Distances Trip distance (kilometers) MODE 1 3 5 7 9 11 13 Walking Shared e-scooter Shared bike Ride hailing Car sharing Public transit Source: BCG analysis. 100,000. Frequent users might find it more an e-scooter, it takes almost four months, economical to buy their own e-scooters, giv- not counting marketing and overhead ex- en the relatively modest starting retail cost penses, for a rental company to break even of around $400. In addition, e-scooters’ in- on its investment. (See Exhibit 3.) troduction—especially in cities where they seemed to appear overnight—has generat- The biggest costs today arise from opera- ed mixed reactions and a variety of prob- tions and charging. Every day, providers lems related to right-of-way rules, public typically collect the e-scooters; transport safety, parking, and liability. For these and them to a central facility for battery other reasons, many of the world’s largest charging, maintenance, and repairs; and cities have not yet welcomed e-scooters. then redistribute them for the next day. (For instance, as of this writing, scooters The additional costs incurred are substan- have not yet been sanctioned in Germany, tial. Some providers try to defray these ex- although legislation permitting their regu- penses by using a “crowd-charging” model, lated use is expected to pass shortly.) in which they pay the user (in cash or e-scooter minutes) to take the e-scooter home for charging and then return it the Solving the Current Profitability next day. Challenge While the market potential for e-scooters is Fortunately, improvements are already in promising, their unit economics, at least for the works. Longer-lasting or swappable bat- the first generation of vehicles, are teries will reduce the need for charging and challenging. Today’s e-scooters are not operations. At current price levels, e-scoot- profitable. ers will likely generate a profit if they can last around six months; several providers The average e-scooter currently has a life- are developing their own hardware to span of just three months. E-scooters were boost product durability to as much as ten originally designed for private use, not for months (and some have already rolled out rental, so the heavy usage, rough handling, a more rugged line of e-scooters). These and even vandalism that users inflict on measures, along with economies of scale in them have dramatically cut down on their production, will enhance e-scooters’ profit- durability. Yet despite the modest cost of ability considerably. Boston Consulting Group | The Promise and Pitfalls of E-Scooter Sharing 3 Exhibit 3 | E-Scooters Are Not Yet Profitable E-scooter unit economics in US market ($) Contribution margin per day 3.50 2.85 $3.25 0.40 $0.65 per ride x 0.5 5 rides per day (average) 0.5 per 0.50 minute for 2.0 average of minutes Time to break even .0 115 days = 3.8 months Average vehicle price of $375 ÷ 0.65 daily contribution margin of $3.25 fixed fee 1.00 per ride Durability Price Payment Tax Maintenance Operations Contribution ~3 months per ride costs insurance repairs charging margin Sources: Expert interviews; BCG analysis. Note: Our calculations represent the average unit economics before Bird’s recently announced price increases. The Battle for Market Share tion costs. At the same time, oversupply In their bid for market share, e-scooter pro- might necessitate price cuts and trigger a viders and their investors are willing to sac- price war. (But note that one of the market rifice early profitability to establish a foot- leaders, Bird, announced per-minute fee in- hold while pursuing efforts to fortify creases in April of this year, presumably in product durability.
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