A Glance at the Ride-Share E-Scooter Market as Companies Are Fighting to Survive
"This is not financial advice"
Ride-share e-scooter companies like Bird and Spin are investing in AI technology to make their scooters safer, in response to increasing safety regulations across cities and counties. I learned this—and that I forgot the ride-share e-scooter market existed—from a Jan. 31 WSJ video that reported on this new technology. You probably forgot to, so let’s take a glance at this little world together.
One day in 2017, ride-share e-scooter startups, Bird and Lime, decided to plop their scooters in a few American cities.
Back then, there were no regulations on e-scooters. No going through city officials or filing paperwork. These companies banked on e-scooters being a big enough hit that cities would accept them—and they did. However since then, cities have implemented a limited number of operating permits, and a still-increasing amount of safety regulations.
In Miami for example, the city banned e-scooters for almost two weeks in Nov. 2021, until lifting it after new saftey regulations were established. In Pensacola, another city in Florida, the city proposed banning riding e-scooters on sidewalks, as well as limiting their use between 5 a.m. to 10 p.m. The city however, is considering banning e-scooters entirely if the regulations don’t bring about desired results.
"We're six months in, and we have another six months to go," Pensacola Mayor Grover Robinson said. "… If these changes work in the next six months, we'll know that it's something we can do. If it doesn't improve the situation, then we can possibly look at just punting the whole thing."
Cities usually limit the number of operating permits to just two or three per year, making the ride-sharing e-scooter market even more competitive, and almost certantly guaranteeing some casualties for companies not able to get them. For example in NYC, the city only gave permits to three companies for 2021: Bird, Lime and VeoRide. In Chicago, e-scooter companies are fighting for one of three two-year licenses from the city to deploy a maximum of 3,000 scooters this Spring. In DC, only Bird, Lime, Lyft, Skip and Spin were granted permits to operate around 10,000 cars for 2021.
As previously noted, these permits created a competition between companies for who can develop the safest e-scooters and bend the most to city officials. Bird, for example, is exploring a GPS chip with sensors that can detect when a rider is on a sidewalk and prevent the scooter from operating, while light-electric-vehicle artificial intelligence company, Drover AI, is experimenting with cameras on scooters.
“We look around, via the camera, and our brain is the AI processor onboard the vehicle that is using deep learning algorithms,” said Alex Nesic, Co-founder and Chief Business Officer, Drover AI.
[They’ve] been trained across dozens of cities and multiple millions of images to effectively do granular infrastructure distinction.”
The ride-share e-scooter market in the U.S. is dominated by Bird and Lime, whereas in Europe the two have close competition with company’s like Tier, VOI and DOTT. Ride-share e-scooter companies aren’t just competing against each other however, they’re also up against ride-share bicycles like Citi Bikes and bikes from Lyft. Frequent users can also just buy an e-scooter—their average cost is around $300. However that brings up the whole appeal to ride-share e-scooters in the first place, which is convenience and low cost. On average, a two-mile trip costs $3, and people can park the e-scooter wherever they want.
So do these ride-share e-scooter companies make money? Not nearly enough, judging by Bird’s (BRDS) latest earnings report. As of Feb. 3, BRDS is trading at $3.16 with a market cap of $867 million—a steep decline from the $2.3 billion they were valued at in their SPAC deal with Switchback II in Nov. 2021. Their total revenue YTD from Sept. 2021 was $151 million, with a net loss of $157 million. It’s important to consider the effect the pandemic had on these numbers…but they’re still a scary forecast of the long road to profitability ahead, for BRDS and others alike. While there’s more than a dozen ride-sharing e-scooter companies out there, BRDS is the only major player publicly traded (excluding Lyft and Uber as e-scooters are only a small part of their business). Lime is expected to go public in 2022, and has recently raised $523 million in debt financing.
The market for ride-sharing e-scooters is big —a dozen companies have raised over $1.5 billion in funding, and a report from Boston Consulting Group estimates the market to reach $40-$50 billion by 2025—but it’s also very uncertain. I personally wouldn’t touch BRDS or LIME with a ten-foot pole as the amount of risk to reward isn’t worth it to me. However, if I really wanted to invest in the future of ride-share e-scooters, I’d consider UBER or LYFT as they’re already established as top-players in their market.