Not to be outdone by the bike-sharing craze in China, Silicon Valley is jumping on the e-scooter bandwagon, an idea that sounds great but has significant practical difficulties.
Car sharing and ride hailing began in the West but China, with its huge biking population, was the first to come up with the idea of smartphone-powered bike sharing. As the first mover, China dominates the world with plenty of start-ups and by far the most bikes deployed both at home and overseas.
Chinese start-ups Ofo and Mobike are already competing aggressively against each other and the stars are aligning for this to become yet another showdown between Alibaba and Tencent.
However, things are at a much earlier phase overseas, and the ever-inventive Silicon Valley crowd have now also thrown in e-bikes and e-scooters into the mix. An e-scooter is pretty much what it says on the tin and has a 10 kg motor that can have the scooter moving at around 15mph for about 20 miles. The main players are Jump (robust e-bikes) owned by Uber and start-ups Bird, Spin and LimeBike.
The idea behind these vehicles is exactly the same as the dock-less bike sharing schemes common in China, which creates great convenience but is also the source of a lot of problems.
First and foremost, as these vehicles can be left anywhere, there is scope for huge piles of untidy looking pieces of equipment to appear anywhere in a city, cause annoyance and create a hazard. Regulators were unprepared for e-scooters, which meant that they just suddenly appeared on the streets, which put their noses out of joint making them keen to see the back of these and similar schemes.
The result is a new permit scheme with so many limitations and requirements that a free market of transport services is going to be very hard to achieve. This is because services such as this need scale in order to survive, as they are almost entirely based on fixed costs. Limiting each company to 200 scooters in San Francisco could easily be a death sentence.
If the scooters can address all of the issues that they face (see below), they will be in huge demand – but that means availability will become a huge problem. This is likely to lead to people giving up trying to rent the scooters, or huge price increases leading to the failure of all players concerned.
This is on top of some very real issues that need to be addressed for e-scooter sharing to be anything more than a fad:
1. Bomb-proof: E-scooters need to be very robust to withstand the punishment that they are almost certain to receive from careless renters. This makes them very expensive to buy, but this is more than made up for in lower maintenance costs in the long-run.
However, the Chinese bike companies are not very long-term oriented, and so to compete in the immediate term, the Americans seem to have followed. Hence, the e-scooters out there do not appear to be very robust, and I suspect that broken-down scooters will soon start appearing in droves. The one exception is Jump, which is offering e-bikes that appear to be robust but obviously much more expensive to buy or make.
2. Charging: E-scooters and to a lesser degree e-bikes (which still work with no battery) need to be charged. This is a big advantage of a docking system, as the requirement to dock the vehicles would also serve as an opportunity for the units to be charged. With the scooters being left anywhere, the companies have to go out every night, collect the scooters, charge them and re-deploy them the next day. This adds a huge amount of fixed cost which I think may overwhelm the economics of this system even without regulatory restrictions and the brutal competition that is likely to ensue.
These types of schemes sound like a great idea and can make some claim to be emission-free (by the vehicle itself, as opposed to the plant that generated the electricity), but they are fraught with problems. In a completely free market with a minimum of regulatory contortions, a period of bloody competition would result in an overall winner, assuming that the issues have been addressed. However, the issues themselves are significant and the powers that be seem not to be very keen on the whole idea.
Hence, I suspect that once economic reality sets in, the novelty wears off and the start-ups are back on the street looking for more money, the market will rapidly consolidate or disappear entirely. I would not be looking to put money into any of these companies.
This article was originally published on RadioFreeMobile