Electric scooters have gained the spotlight overnight. We can easily find an e-scooter on every street in the US and Europe. There were more than 100,000 e-scooters in 90+ cities in the US and Europe and the global electric scooters market size was valued at USD 17.43 billion in 2018, projecting to witness a CAGR of 8.5% during the forecast period.
It has bought a sudden revolution in the society and people are preferring e-scooters over other transportation means. Can’t believe it? Have a look at the below stats that why e-scooters have gained a rapid name.
- Lime captured 11.5 million rides and Bird attained 10 million rides in one year itself.
- e-scooters saved 17.95 pounds of CO2 emission; Bird riders saved 12.7 million pounds and Lime riders saved 5.25 million pounds of CO2 emissions.
- The bird turns out to be one of the fastest startups to hit a $1 billion valuation.
- The average adoption rate of e-scooters is 3.6% as compared to a 2-3% adoption rate of traditional taxi sharing services.
Unit economics: Clear skies for the e-scooter industry
As we know about Lime, the champion of the e-scooter industry announced $335 million in new funding at a $1.1 billion valuation. And then led by Uber’s great investment in e-scooters has brought a total venture funding of around $934 million in the year 2017, which has raised to $900 million this year. As Uber becomes a strategic partner in the e-scooter space, it will open doors of more growth opportunities for the e-scooter industry. Very soon, Uber and Lime will launch co-branded scooters in the market.
This directly indicates clear skies for the e-scooter evolution. Unit economies have really turned out good for the e-scooter industry as they have managed to capture a tremendous sum of VC money. In general, unit economics defines the amount of money a firm makes or loses during a single transaction i.e. a single e-scooter ride.
Below are a few unit economics of e-scooters, as calculated for Bird:
- Bird raised $150 million in series C funding that was led by Sequoia Capital with a $1 billion valuation.
- Three investors-Sequoia, Tusk Ventures, and Accel are already done with the documentation and they have invested a good capital for Bird.
- On average, the length of a Bird trip is 1.6 miles, charging $1/trip and $0.15 per minute.
- The average speed of an e-scooter is 7.5 miles per hour which roughly costs a trip at $2.92.
- So, an average e-scooter can earn around $16 each day.
And this indeed is a piece of good news for the e-scooter industry. But the next question is how much does an e-scooter cost for its service and maintenance? Again there’s good news!
You can simply hire anyone overnight to charge the e-scooters and then deploy them the next morning right away. This would cost not more than $5 and a time of around 3-5 hours is consumed while the scooter charges. And farming to some good contractors, you can even get rid of the electric bills. So, roughly an e-scooter’s revenue per day is approx. $11.
But you can’t simply ignore the maintenance costs and operational costs including rebalancing. On the safer side, these maintenance operations don’t occur frequently, so you can mint a good amount from e-scooter trips.
For instance think of the e-scooter giant Bird. According to The Information publishers, gross revenue of Bird typically ranges from $4.12 to $4.27 per ride. Out of this total revenue, depreciation expense typically ranges from $0.94 to $1.17. The charging of the ride costs them about $0.79 which is way too less than the previous year figure (They are controlling the expense here superbly!!!). Repair of the e-scooter ranges from 8% to 11% of the gross ride. This figure grown because they decided to hire their own repairmen so, you can consider that as a one time spike.
But that’s not it! Let’s move to the next phase of the story.
Why e-scooter industry has faced a sudden turnaround
In the first quarter of this year, Bird, one of the leading e-scooter vendors lost over $100 million and revenue remained nearly $15 million only.
Moreover, a few months back, Lime launched its new custom-designed scooter, Gen 3, and the scooter breakdowns due to its complicated design and weight.
It was observed that the colder months of the year are not at all favorable for the e-scooter industry. As people and regular travelers aren’t boarding e-scooters in the wintertime, the e-scooter industry is struggling really hard to raise funds by convincing the investors they had. No doubt, in summers, e-scooters were a hit as they easily managed to capture a venture funding of over $934 million from investors, but in the winter, the industry is facing a tough time.
So, e-scooters might face poor unit economies due to seasonality factors and it might slash your revenue potential during this period. But you can earn a lot during the peak seasons and migrate to some other place taking the help of logistics and get sales from there.
Despite the minor challenges which are short-lived, e-scooters are highly preferred by people to escape the traffic congestion and get a cheaper ride to travel to their destination. Moreover, being an eco-friendly option that has zero gas emission, industry owners are welcoming e-scooters. We don’t need expensive rides anymore, rather we need a cheap ride which keeps us away from the irritating traffic.
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