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Press Release

16 August 2019

The scooters are coming

Just over a year ago, Google parent company Alphabet joined in the US$300m funding round for electric scooter start-up Lime. If you have visited a US or European city over the last year you will probably be familiar with Lime’s, and their competitors’, electric scooters which can be picked up on pavements and in parks and used for speedy journeys around city centres. Unlike the more established bike hire schemes, they don’t need to be docked once a journey is completed, making them more convenient. Competitors are crowding the market with fellow US firm Bird also raising hundreds of millions of dollars in capital over the last year.

Having used Lime scooters myself in recent weeks, I can confirm they are convenient and fun, but, with all the different players in the market, the economics seem stretched at this point. Founder of Berlin-based venture capital firm Target Global, Alexander Frolov, commented in a January 2019 Financial Times article that the scooter-sharing proposition is different to the bike-sharing concept, which saw Asia-based businesses such as Mobike and Ofo retreat from many European cities due to theft, vandalism and general unsustainable losses as bikes were mistreated by users. Frolov added that the lifetime of an e-scooter is relatively short so firms only have a limited time to make money from a piece of hardware once it is out for hire. The challenge for providers seems to be developing scooters that are tougher, and therefore have a longer duration, than those of competitor firms.

In January 2019 another start-up, Flash (recently rebranded as Circ), raised €55m in an initial funding round. Founder Lukasz Gadowski says the firm was focused on developing a more durable and advanced scooter. The capital that was raised was largely allocated to design. Mr Gadowski added there was no real way to differentiate a scooter-sharing business in the current market; you simply have to excel on all fronts, and the path to profitablity seems to be designing and releasing more durable scooters. In a recent update, Circ claimed its rental service clocked-up a million rides in the four to five months since the launch in January 2019, achieving the milestone sooner than any other scooter firm.

Regulatory challenges stand before Circ and other start-ups. Paris cracked down on e-scooters in July 2019 after thousands cluttered the streets amid few regualory controls. Speeds have been limited and fines imposed for pavement riding. Circ seems to be taking measures to work with regulators. It has established a strategic partnership with the state-owned Swiss Federal Railways, which has resulted in the creation of designated parking spaces for scooters in railway stations and is looking at digital integration as the two parties look to create seamless mobility for rail and e-scooter users. Google’s interests in Lime is evident when navigating using Google Maps in a city centre - Google Maps has integrated the option of reaching your destination via a Lime, as well as the pre-existing integration of taxi sharing services Uber and Lyft. 

With funding from the likes of Google and Bain Capital, e-scooters could well transform the future of urban transport. However, consolidation is likely in the journey towards sustainable business and achieving regulatory harmony will be a further challenge.

Nicholas Thompson, Assistant Investment Manager

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The scooters are coming
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