As cities across the world grapple with issues of congestion, pollution, and accessibility, a new form of urban transportation has emerged – the escooter. These compact and nimble vehicles promise to provide a low-carbon solution to the problem of traffic, while also enabling people to move around quickly and efficiently. Over the past few years, venture capitalists have poured over $5 billion into the escooter industry, with the hope of capitalizing on this promising new trend.
But has the hype around escooters lived up to expectations? Are they really the answer to the challenges of urban transportation? And is the $5bn investment justified? In this article, we take a closer look at the business model of escooter companies, their environmental impact, and the challenges they face.
The Business Model of Escooter Companies
The escooter industry has been characterized by fierce competition, with dozens of companies vying for market share in cities around the world. While some early entrants like Bird and Lime have faced challenges, other players like Voi, Tier, Dott, and Bolt have managed to establish themselves as serious contenders in the market.
According to Paul Murphy, a partner at Lightspeed Ventures, European escooter startups have benefited from the early investment made by American rivals. This has enabled them to operate with longer-lasting vehicles and better unit economics, which are crucial to profitability. Murphy notes that the biggest levers for escooter companies are increasing the utilization rate of scooters and extending their lifecycle.
Many escooter companies are now targeting profitability, with Tier aiming to reach the milestone by the end of this year, while Voi is targeting being EBITDA-positive by the same point. Dott and Bolt are also making progress, with the former claiming to be “inches away” from being EBITDA-positive, and the latter having been EBITDA-positive since 2019.
One of the challenges for escooter companies has been to operate in a regulatory environment that is often uncertain and complex. In many cities, operators now have to gain a license or win a tender to put their vehicles on the streets. Some cities like Paris have even considered banning escooter rentals altogether.
The Environmental Impact of Escooters
Escooter companies have marketed themselves as a low-carbon solution to the challenges of urban transportation, but the reality is more complex. While they certainly emit less CO2 than cars, they are not necessarily better for the environment than other forms of transport like cycling or walking.
A 2022 study by ETHZurich found that escooters used in sharing schemes “emit more CO2 than the transport modes they replace.” This is because shared micromobility options often replace lower-carbon cycling and walking. While they do reduce air pollution in cities, they also have a higher environmental impact due to their heavier batteries and operational CO2 impacts.
The production of escooters also has a significant environmental impact, with the use of materials like aluminum contributing to their carbon footprint. A 2021 study by the Bochum University of Applied Sciences found that the production of Tier escooters was dominated by the production phase, and recommended finding a substitute for aluminum and improving the lifetime of vehicles to reduce the frequency of battery replacements.
The Challenges Facing Escooter Companies
The escooter industry faces a number of challenges that will need to be overcome if it is to become a sustainable and profitable business. One of the biggest challenges is the regulatory environment, which is often uncertain and complex. Operators need to navigate a patchwork of rules and regulations, which can vary significantly from one city to another.
Another challenge is the public perception of escooter sharing schemes, especially after a number of high-profile accidents.
Michael Hurwitz, former director of transport innovation at government body Transport for London, says that cities’ adoption of shared micromobility schemes presents a tricky balancing act.
“I think for cities, the jury is out,” he says. “What cities and the operators are working through is, ‘Can you come up with a level of regulation that gives people comfort that you’re providing an accessible and safe service with something that can break even for the operator?’”
He adds that the acceptance of shared micromobility services will likely be much higher in cities that don’t have things like public bike rental schemes already in place.
It’s important to remember that all of the European operators also now offer electric bike rental schemes, and Hurwitz says they “seem to be an alternative which is less controversial and creates less tension” than scooters.
Dmitri Pivovarov, VP of rentals at Bolt, agrees that much of the scepticism towards scooters comes from the novelty factor: “It’s a new mode of moving around and of course it falls under scrutiny.”
And while Paris may ban scooters entirely, Bolt, Voi, Tier and Dott are operating in hundreds of cities around the world. If their profitability claims are to be believed, they can keep regulators on side and keep decreasing the environmental impacts of their vehicles, European startups might just succeed where Bird failed.
Another challenge facing escooter companies is the issue of accessibility. For example, while escooter services are often cheaper than traditional taxi services, they can still be too expensive for many people. This means that, in practice, they may be less accessible to those who need them most.
Furthermore, many people with disabilities or mobility issues are unable to use escooters, and this can lead to them being excluded from using certain services. Escooter companies are working to address these issues by offering more accessible vehicles, such as electric wheelchairs, and partnering with organisations that provide accessible transport services.
Despite these challenges, there is no doubt that escooters have had a significant impact on the transport sector in a relatively short amount of time. They have changed the way people think about getting around cities and have forced traditional transport companies to adapt to changing consumer preferences.
The future of the escooter sector is far from certain, but one thing is clear: VCs will be watching closely to see whether their investments in this sector will ultimately pay off. If they do, the escooter revolution may just be getting started.
Want to amplify your startup’s story? EU Startup News is your launchpad to reach startup founders, investors, and C-level execs across Europe. Discover our tailored promotional strategies such as Sponsored Articles and Partnerships. Click here to learn more or contact us directly at [email protected]. Join us, and let’s make your startup the talk of Europe!
