Micromobility is Supposed to be a Half-Trillion Dollar Industry
What’s Holding It Back? (Hint: It’s not City Administrators)
By Paul Steely White
I love the micromobility sector. It’s full of bright, idealistic people excited to usher in a post-car world. At the same time, I see many scooter executives making the same wrong turns that car companies made, like marketing their vehicles as if they were race cars. We should be about safety and city-friendly mobility, not trying to be the next Ferrari.
Another pet peeve I have is when companies blame city governments for their own problems. At industry forums and conferences I have often overheard some version of this lament:
City departments of transportation care more about community complaints than they care about solving climate change. Instead of kowtowing to car-loving NIMBYs, city planners should build more bike lanes, put limits on car use, and allow companies to run larger fleets of shared e-scooters and bikes.
This criticism, most often lobbed at city DOTs, arose again a few weeks ago in my LinkedIn feed in the form of this comment from a micromobility executive: “Global warming is more important than a misparked scooter.”
To industry insiders struggling to make a profit in what has proven a hard business, this is a seductive narrative.
If we’re honest, however, we know that there are much more fundamental limitations on micromobility’s growth than city regulators. These constraints are entirely the industry’s problem, and they have to do with companies’ continuing failure to manage the high monetary and political costs of fleet operation.
The fact is that most city regulators would like nothing more than to grow micromobility. But, their hands are tied until industry develops the technologies to solve its high cost problem. Until then, shared micromobility services will continue to be a small and unprofitable piece of the overall transportation pie. That’s not to say that this is impossible — it’s actually quite possible, and Superpedestrian is leading the way.
Why Costs are Too High
The purchase and maintenance of the vehicles is by far the biggest cost of doing business. For shared scooter operators like Superpedestrian to cover depreciation, spare parts and labor, each scooter must perform an average minimum number of trips per vehicle per day (TVD).
TVD is the golden metric in this business. If your company holds a coveted operating permit in a dense, affluent, high population area like Paris or downtown Chicago where TVD is high, then you are probably making a profit. But if you are operating in a lower density town or neighborhood where each scooter is seeing only 1 TVD, then you are probably losing money.
(The economics for shared bikes and e-bikes, which typically get fewer rides but cost more than scooters to purchase and maintain, are even more daunting. This is why the leading bike share providers charge cities $100k or more per station plus ongoing operating subsidies for the privilege of their service.)
This inability to operate profitably in lower TVD areas is a big problem for an industry that sells itself as a first and last mile solution, because the first and last mile challenge is biggest in lower density neighborhoods.
A good chunk of the $.5 Trillion total addressable micromobility market will be earned in the Parises and Chicagos of the world. But most of it resides in 10,000+ moderately dense cities, towns, neighborhoods and suburbs. Not only are there more potential customers in these areas, but this is where we can do the most good, replacing car trips and emissions while saving households time and money. Less dense areas, however, are also where demand is well below the current TVD profitability threshold.
Thanks to patented internal systems that extend vehicle life, autonomously maintain the vehicle and prevent costly repairs, for Superpedestrian the minimum TVD we need to reach in a given city is significantly less than 1, but for most companies it is around 2 or more. This reality of urban geography and population is not going to change anytime soon. What can change, however, with the right technology and labor practices, is the cost of maintaining a fleet.
If shared micromobility is not capable of serving the whole city, but only the more affluent and denser areas, that is not just a business problem. It’s a political problem, and a moral one. Cities are right to demand that in exchange for operating in the public right of way, companies must serve the public. There is some evidence that companies are getting the message. In Chicago, after the city cited their failure to serve equity zones, operators began increasing their operations in low income areas. Whether or not this is economically sustainable in the long term remains to be seen.
Here at Superpedestrian, we tackled the cost problem by developing new ways to autonomously protect the scooter’s internal systems, especially the electrical components that are most expensive, and most prone to failure. These patented technologies, which we call Vehicle Intelligence, dramatically lower our costs, enabling us to sustainably serve a much wider array of urban and suburban geographies.
Vehicle Intelligence, in giving us higher profit margins, also helps us lead the industry when it comes to non-gig labor practices; lasting, sustainable scooters; and our demonstrated commitment to invest in underserved areas. I believe that in doing so, we have already made a difference in shifting the micromobility industry’s priorities from growth-at-all-costs to safety and city compliance first.
As we, and I hope other companies successfully tackle these challenges, then we are in a much stronger position to begin shifting policy in partnership with the cities we serve. For one, we will have earned the trust of the city regulators and elected officials whom we seek to influence. More importantly, we will have the vital political support of a large and growing ridership that is truly representative of the cities we serve.