Micro-mobility is the ‘Model-T’ movement of our time and will change how we move around.
It is a key part of achieving net-zero emissions for transport. Moreover, industry players are actively seeking ways to grow faster, achieve rapid adoption, and build sustainable business models. Since its inception into a viable industry, Netscribes has been tracking and monitoring the micro-mobility space and expects this to scale four times faster than any other innovation in the mobility industry.
Daniil Pavliuchkov, Head of Product Growth at TIER Mobility, sat down with Siddharth Jaiswal, Automotive Practice Head at Netscribes, to discuss the evolving fate of the micro-mobility industry as well as ways to foster consumer confidence in this space.
Siddharth: Micro-mobility is a new and ambiguous term relative to the wider automotive ecosystem. What is your take on micro-mobility and why do you think it has become so popular in the last couple of years?
Daniil: Micro mobility by definition is a mode of transportation like personal mobility, which is suited for individual use cases. So micro-mobility provides a possibility to rent a vehicle on demand. It could be a bicycle, a moped, or a kick scooter, If you imagine renting a scooter somewhere in a very sunny California where it’s always good weather, it’s really fun to take one for a ride and enjoy the wind and scoot through the streets. I think this is where it became very popular in the last five years. Since then, micro-mobility has spread across multiple cities and gained the trust of a wider population.
Siddharth: Micro-mobility finds its root in being a leisure-oriented product and now it has turned into a billion-dollar industry, highly sought after by investors and venture capitalists. Why do you think this phenomenon has taken off so rapidly amid automotive being known as a legacy industry?
Daniil: I think unit economics has played a huge role. For instance, if you get an electric scooter for a thousand dollars and take 10 to 15 trips on an average day, you may make a profit of fifteen dollars daily. This means that within three months, you’re going to break even with the scooter’s price. This is a quick turnaround for value vs capital cost for the scooter. Also, the scooter lifetime at that time was estimated to be six to seven months, which meant this would be doubled in three to four months again. This economics has attracted venture capitalists.
On the other side, operations benefitted from this business model. Lime was one of the first companies to enter the market. They came with a concept of “Juicers”: people who would be collecting scooters on the street, bringing them home, charging the batteries, and placing them back at the drop-off points. This was done as a part of the gig economy which was capital-efficient and easy to scale. So that was the first generation of micro-mobility that attracted VCs. This changed later as new players entered the market, and cities started to create more regulations about how micro-mobility should behave.
Moreover, it became a part of the larger conversation surrounding the climate change crisis, which has given the sector a great boost in recent years. And from a consumer’s POV, it’s great to have the liberty of choosing affordable personal transportation.
Siddharth: Players in the micro-mobility space reflect on COVID-19 being a big factor that drove the sector’s growth. With restrictions being removed in the new normal, what impact will this have on micro-mobility?
Daniil: It was slightly different during the COVID-19 outbreak. Micro-mobility experienced a huge drop. The main use case of traveling disappeared. A lot of companies were struggling with losses, with one of them losing as much as 60% of its valuation at that time. Most of these companies needed to raise another round to sustain themselves because nobody was renting electric scooters. Now, as people get back to the new normal, they may still be hesitant about public transport and prefer individual mobility. While COVID-19 was a restricting factor, people do seem to be opting for micro-mobility today.
Siddharth: There is a wave of new startups entering the micro mobility space which has led to a very vibrant ecosystem. This can, in turn, lead to consolidations, pushing the industry to reach maturity. In which stage is the micro-mobility industry today? Are we at the cusp of becoming more mature?
Daniil: A lot of such consolidations are occurring in the US and Europe markets. Almost all of the cities there have micro-mobility tenders and micro-mobility players. So it’s very difficult for new companies to enter the market. If you go to Latin America, Northern Africa, or Australia, the market there is still pretty much open. Companies with good capital and teams can still enter the market without leading to consolidation for at least two-three years. Micro-mobility market in the US was the first to reach a maturity stage. Europe is catching up because it has a different approach to regulations. The European countries are more stringent with regulations and laws than the US is. So, this is an additional entry barrier for smaller players. From the looks of it, the market will be consolidating between two to four operators in each of the regions in the country.
Furthermore, if we talk about the scooters, there are two-three good manufacturers in China. However, these scooters were not designed for micro-mobility. They were originally designed to be personal scooters that you buy, keep at home, and take to your work. They also had some IoT integration with internet connectivity. But this is still mostly a scooter that is designed to be an individual use case. What is currently missing right now is a scooter model that is designed explicitly for the public use cases, i.e. a shared scooter model. A few players in this market are well-funded and they’re looking to establish their scooter model as well as manufacturing. They do not want to outsource to China and OEMs and they aim to have control over the IoT integration in the scooter. As a part of this trend, new scooter models will become the highlight in the next five years.
Siddharth: Micro-mobility has been solving specific challenges and concerns. However, the sector is at the receiving end of bad press, especially about scooter littering in the cities and issues with traffic. What do you think is the solution to such challenges?
Daniil: Firstly, an individual scooter model that is designed for shared mobility can help. Right now, every scooter has a GPS that is not super precise and it may not include other sensors. With direct access to the hardware, one can precisely understand the issues with the scooter. Secondly, when micro-mobility first saw the light of day, people took it for a leisure ride where they just use a scooter, drop it, and you forget about it. That’s what has led to littering.
With time, people will get used to micro-mobility and consider proper parking. Regulations and parking lots will come into the picture soon and the micro-mobility space will improve a lot. However, there are other critical issues such as people using a scooter while they are drunk which leads to a negative sector outlook. Industry players are trying their best to take up more responsibility and remove such hurdles.
Siddharth: Some companies are looking into backward integrations: designing and manufacturing their scooters. How will these operators evolve going forward?
Daniil: Designing and manufacturing your own scooter can be expensive and inefficient. This includes developing the prototype, testing it, shipping it back to the factory for improvements, building a modified version, and so on. It may take over half a year to get to the first working porotype of your liking.
Furthermore, if a company wants to scale it, they will need thousands of these scooters which will be a very long process from a manufacturing standpoint to set up. Hardware integrations take time and are quite expensive. Only a small lot of well-funded companies can afford to manufacture their own scooters. New market players, on the other hand, will continue to use the existing models and rely on OEMs for manufacturing. Once a player enters this market, it’s very easy to defend the market share.
Siddharth: Who are the end consumers willing to use micro-mobility?
Daniil: People in the age bracket of 25 to 35, with an active lifestyle and who live alone in a city, are the end consumers of micro-mobility. This persona cares about the planet and would prefer an electric vehicle over ICE. There is also another user group that is concerned about expenses. These people want to optimize their budget and for this reason, they choose micro-mobility on very specific occasions. While it may not be an everyday use case for them, this persona chooses micro-mobility over taxis when it’s cheaper.
A third and relatively new persona gravitates towards young families, where more than one person uses micro-mobility because of their collective income. These people are interested in the experience, utility, and flexibility of the service and are not concerned about the expense.
Siddharth: One clear customer base is B2C. However, there’s another possible group interested in the micro-mobility space: fleet operators, such as food delivery operators. In the future, will this use case witness growth?
Daniil: In the beginning, when TIER Mobility offered a 24-hour pass, some companies bought it to deliver pizzas and groceries using our vehicles. However, this turned out to be a negative experience as they were driving around all the time which resulted in us enforcing some limitations. While individual companies are interested in doing that, it’s very difficult to organize. They want to have their app, full access to the vehicle, and control charging. So, they require a white-label solution, which is not a possibility for the micro-mobility market.
There’s another B2B use case where a company buys credits for its employees and provides micro-mobility as a perk. This may become an industry standard. Furthermore, another B2B use case can arise during events and conferences that require traveling where micro-mobility companies may rent out a few hundred scooters. For example, some universities may want their staff or their students to drive around the campus on a scooter because it’s faster and smaller than a bicycle, and they don’t need to own it. This shared use case can become an easy, hassle-free experience.
Siddharth: How difficult will customer acquisition and retention be in this space when we reach a more mature environment?
Daniil: Acquisition is a very tricky problem. Currently, if people spot the scooters over and over again on the street or if they see someone riding it around the city, they become curious and may eventually try it out. So the more vehicles a company has in the city, the bigger its acquisition channel. The vehicle itself is the biggest acquisition driver. Additionally, they indulge in paid advertising, partnerships, influencer marketing, and brand image building. This is the second acquisition which has been working quite well for the companies.
However, little is known about whether companies are coming up with a channel to retain these customers. Price will be a huge retention driver or barrier, and this will be followed by scooter availability. It must be available when you need it, be it next to your office, grocery store, etc. The other secondary factors can include mobile app experience, loyalty programs, and attractive subscription plans. Not to forget, a stable scooter riding experience is important. There should be no bugs, incorrect charging, inaccurate GPS, or other hardware issues. So, price, scooter availability, and a stable riding experience will be key to retention.
Siddharth: There have been instances of compromised safety and vandalism. From a product standpoint, what kind of challenges do micro-mobility operators face?
Daniil: The main challenge right now is that the experience itself is very similar across brands. Companies need to come up with a differentiation that could reflect in their brand voice and their user experience, or it could be additional mechanics such as loyalty programs or rewards.
Furthermore, littering and vandalism are also critical issues. For example, London or Paris have very well-advanced regulations. These cities require operators to fulfill core demands. For example, there should be no more than three scooters standing together at any time in a parking zone. If people drop the scooter anyway without finishing the ride and this exceeds the scooter count limit, operators should be able to detect it quickly and send a person to take it right away. Fleet distribution and management need to be a lot smarter than they are right now. So, cities are enforcing control through regulations and if the players don’t fulfill the demands, they may lose their contracts.
Siddharth: In five to ten years, how do you see the micro-mobility industry evolving?
Daniil: There will be an evident rise in new scooter models which will push for more tech-advanced control and awareness. Perhaps, an open standard will be followed by all players across fleets to ensure better management in the next five years. There’s also a possibility of shared mobility companies collaborating with public transport wherein a person takes a scooter ride from point A to point B, boards a train from point B to point C, and then takes another scooter ride from point C to point D. This may reduce the cost of transportation.
Another interesting use case that can arise with the growing popularity of micro-mobility is serving more than one person. Scooters or bikes currently are designed for solo rides. In the future, companies may explore an inclusive modality, renting out scooters to a group of people. A part of the target group may find the scooters too heavy. Lighter models are something that companies may want to look into. What else? Micro-mobility companies need to explore the possibility of targeting low-income professionals or students. These prospective consumers may require affordable mobility if they hail from a locality with an improper bus connection, or if there is no subway. Serving them could be an interesting direction. In the next ten years, the focus will be to stabilize the micro-mobility space. The bottom line is quite diverse and there are many, many different possibilities to explore moving forward.
Siddharth Jaiswal leads the automotive research team at Netscribes and has been a part of the industry for close to a decade. He harbors a keen interest in the future of mobility, autonomous technology, and vehicle E/E architecture. In his free time, Siddharth loves tuning engines, riding his vintage bike, and spending time with family. You can reach out to him at siddharth.jaiswal@netscribes.com.
Daniil Pavliuchkov
Head of Product Growth at TIER Mobility
Daniil has managed startups and scale-ups ranging from 10 to 2000 in size and served as a leader for firms with valuations from 1M to 1B. Apart from focusing on monetization, experimentation, and growth strategies, he also coaches other product managers, intending to equip them to assume leadership roles.
