Electric scooter companies pull out of cities worldwide amid coronavirus

Dockless scooter companies charged into cities in 2018, promising a mobility revolution with cheap, clean rides and billions in venture capital backing. Yet they soon faced roadblocks, including shaky business models, safety concerns, and fast-moving city regulators. At the start of 2020, cash-losing operators were shrinking their headcounts and vehicle fleets.

A Lime shared electric scooter is parked on a street in Santa Monica, California. (AFP)
A Lime shared electric scooter is parked on a street in Santa Monica, California.

Now as governments around the world fight to slow the coronavirus pandemic, micromobility companies are facinga deeper existential challenge. The two largest global operators, Lime and Bird, drastically reduced fleets by mid March. Several other startups, including Wheels and Jump,say they’re looking at how to continue operating as cities issue lockdown orders and demand plummets. The appeal of sharing a high-touch vehicle with an unknown number of strangers has succumbed to the fear of viral transmission.

Lime’s CEO and co-founder Brad Bao wrote in a blog post on March 21that the startup is “winding down or pausing" service in all markets but South Korea. Prior to the pandemic, the company operated nearly 120,000 scooters in 30 countries across the Americas and Europe. Bird announced it is removing its fleets in six U.S. cities:Miamiand Coral Gables, Fla.; Portland, Ore.;and Sacramento, San Francisco,and San Jose.It had already pulled vehicles from21 European cities.

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Jump, a subsidiary of Uber Technologies Inc., haspaused electric bike and scooter rentals in most of its European marketsandtrimmed the size of its fleets across the U.S. It stopped service entirely in Sacramento at the city’s request. Lyft Inc. has continued to operate its network of mostly docked bikeshare systems in eight U.S. markets.So far, it’s kept dockless scooters available for rent in all urban markets but Miami. Every company with vehicles in circulation said that they have heightened their handlebar sanitation protocols and are encouraging riders to do the same.

The sudden disappearance of scooters and e-bikes comes after months of industry turbulence. Lime and Bird have struggled to raise money from investors, and both cut staff starting late last year. The companies, once singularlyfocused on growth, have realized their problematic business plans need rethinking.

Last year, talks of an acquisition of either company by Uber didn’t pan out. Some industry watchers said the eye-popping valuations of each—in 2019 Lime and Bird hit $2.4 billion and $2.5 billion,respectively—were a factor. The Information reported on Thursday that layoffs are now imminent at Lime, as it seeksemergency funding at a valuation of just $400 million. (A Lime communications officer denied that layoffs are coming.) Uber and Lyft, both of which went public in 2019, conducted layoffs in their own micromobility divisions late last year, and both recently pulled dockless vehicles from several markets.

Wheels and Lime say ridership was rising before the start of widespread social distancing. The decisions to reduce urbanfleets now have been motivated largely by asense of responsibility for the health of their riders and workers who maintain the vehicles, Lime and Bird say. The economics of the business is also an undeniable factor, saidDavid Spielfogel, Lime’s chief policy officer.“If everyone is sheltering in place and not moving around, the business is no longer sustainable," he said. Tourists, which generate significant scooter ridership in many cities, have also vanished from most markets. While there may be ways for Lime to generate revenue during the crisis, that’s not a priority while people are at home, and“governments are trying to get the virus under control," Spielfogel said.

Many investors, already skeptical about the viability of the e-scooter business, say the current situation could be thenail in thecoffin for an industry beset by financial, safety, and regulatory woes.“I’ve heard a number of people compare the plight of the scooter companies to Uber and Lyft. Like them, scooters are seeing plummeting usage,"saysAaron Michel, a partner at the early-stage venture capital firm1984 Ventures, which has no investments in the micromobility space. “Unlike Uber and Lyft, though, the verdict was pretty much in on the scooter industry before the virus arrived." Companies without major backers will go under, he expects, while deeper-pocketed businesses will pare back to bare minimums.

Emily Castor Warren, a principal and director of policy at the transportation planning firm Nelson\Nygaard and a former director of policy at both Lyft and Lime, agreedthat the pandemiccould be a death knell for scooter businesses with large overhead costs, especially those that were already in an uncertainfinancial position. “I think it’s pretty dire," she says. “If these lockdowns persist, they’re going to have to, at the very least, undertake major layoffs to core teams, because the one cost they can’t bring down to zero is salaries for headcount and real estate for their offices."

The short-term outlook maynot be soprecarious for every micromobility company.Wheels, a startup that operates dockless electricminibikes in 17 cities in Europe and the U.S.,raised $50 million in October in a funding round led by DBL Partners.The company announced on March 27 that it will roll out vehicles with self-cleaning handlebars and brake levers that can be used for delivery services and other essential uses, while its shared bikes are suspended until the end of March.The company has partnered with NanoSeptic, which has developed the self-cleaning surface. The technology usesmineral nano-crystals that continuously oxidize organic contaminants.

Scooter operator Spin hasn’t felt the same capital pressure as some of its peers—it’s owned by the Ford Motor Co. Until this week,Spin was the sole scooter providerto maintain normal operations—in its case, serving 66 U.S. cities and 12 college campuses—but it changed course on Tuesday. The company will retain scooters only inAustin, Baltimore, Denver, Detroit, Los Angeles, Portland, Ore., San Francisco, Tampa, and Washington, D.C.

“We have made the decision to pause our operations, as of today, in all other cities due to significant demand drop off as communities combat the fast-spreading virus," the company’s co-founders wrote in a Medium post. “This pause will remain in effect until further notice." Spin’s communications staff couldn’t clarify which specific markets would be losing vehicles, and Ford’s communications team rebuffed multiple requests for interviews with executives.

Molly Turner, a lecturer in business and public policy at the University of California at Berkeley and an adviser to technology startupsincluding Spin, said the cities the company is continuing to serve may indicate where it’s had the greatest financial success to date. The markets Spin is pulling out of may show “where scooters weren’t a viable business or didn’t have enough penetration to succeed without the special partnerships or promotions that are impossible right now," she says.

That may be the case for all companies in question, as travel right now, no matter what the mode of transportation, has come to a near standstill. Several scooter operators, including Jump, Lime, Spin, and Wheels, are considering opportunitiesto partner with local governments or essential service providersas a way to continue operations, as residents avoid buses, trains, and other public transit under shelter-in-place mandates. New York City saw ridership on its Citi Bike system jump 67% in mid-March, after Mayor Bill de Blasio announced social distancing guidelines. OnMarch 21, ridership on the city’s subway, the nation’s largest mass transit system, was down 87% from the same time last year.

Some investors view the decline in transit useas one reason foroptimismabout the mid-term prospectsfor micromobility.Assuming commuters remain skittish about crowding into buses and subway carsafter the shelter-in-place orders lift, scooter and e-bike companies could take the opening to push for looser regulations and the reversal of the scooter bans ordered insome world cities, saysBradley Tusk, aco-founder and managing partner of Tusk Ventures and an investor in Bird.“With warming weather, better needs, and arguments for legalization and less saturated markets, [and] with companieslike Lime contracting, there’s a legitimate opportunity over the next 3-6 months," he wrote in an email.

An additionalupside could come in selling or leasingscooters and e-bikes directly toriders, saysNiko Bonatsos, managing director at General Catalyst, an early-stage venture capitalfund that hasn’t invested in dockless rentals. “Right now we hate each other and can’t standeach other’scompany, andgetting an Uber or grabbing someone else’s shared scooter might not be the best idea," he said.“But if you have your own bike, now is the timeto use it."Bird offers a monthly leasing program, as does the electric moped startup Zebra.

For cities that have come to valueshared micromobilityservices as a sustainable transportation option, subsidizing them may be the only way to secure their existence long-term, Castor Warren says. Some traditional docked bikeshare systems, including those in Boston, Chicago, andWashington, D.C., are owned by local governments but operated by Lyft. “In that model the city has more ability to ensure continuity of operationsand ensure that service will be provided to the public, because they’ve extended their own resources, even if the bottom falls out of the economy," she says.

Such a scenario would prove what skeptics have said about dockless scooters and ride-hailing companies from the start. History has shown that establishing a new transportation serviceoften requires massive subsidies from investors or governments.

For now, even though they may be allowed to continue to operate in many cities, the scooter companies are going it alone. SaysTurner: “They’re not getting a bailout from Congress."

First Published Date: 28 Mar 2020, 08:14 AM IST
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