The unit economics on micro mobility are tight, and most operators are still losing money on their fleets. In our research, we found that by increasing the location accuracy of scooters and bikes, fleet operators can make an extra 500$ a year from their micromobilty asset.
Photo by Christine Roy
The unit economics on micro mobility are tight, and most operators are still losing money on their fleets. At the beginning the pressure from the investors was on growth, while today they are putting all the pressure on profitability. Given the growing size of fleets, even slight adjustments can have a significant impact on the operator’s bottom line.
Based on McKinsey reports on the industry, micromobility operational costs break down into six buckets: charging, repairs, credit card fees, city permit fees, customer support, and insurance. With a total operational cost of $2.95 per ride, more than half goes to charging costs at $1.72 per ride, while insurance comes in between $0.15 and $0.20 per ride. With profit margins of just $0.70 per ride, a reduction in any cost component is welcome.
In our research, we found that by increasing the location accuracy of scooters and bikes, fleet operators will reduce the cost of charging, cost of insurance, city fines and instantly raise rider satisfaction that will increase their revenue. When equipped with better location technology, operators could earn more than 500$ per scooter every year!
Charging is one of the largest costs in micromobility. Hired or third party chargers run around the city plugging up scooters or replacing batteries wherever the location pops up. The costs build the longer it takes to find the scooter, and we’ve all seen the pictures of scooters ending up in ridiculous places. If technology could reduce the search area from a block to a street corner, charging costs would go down and charging units would be able to reach more scooters in a night. This would reduce costs associated with long search times as well as enable companies to charge more scooters with fewer employees. Improved location accuracy would enable 15%-30% decreases in charging costs, equating to $360 annual savings for every scooter.
It is critical to reduce all possible barriers between the customer and the scooter. Increased location accuracy can do nothing but help in this regard. Trying to find a scooter in a crowded city and realizing it’s on the other side of the street is a major inconvenience and could be dangerous. If one brand is consistently easier to find, riders will continue to reward the convenience of micro mobility and become happy, repeat customers. 1% gains in annual revenue from increased numbers of loyal riders is about $80 a year for each scooter.
One of the unexpected expenses for micromobility operators is municipality fines. In a lot of cities, the operators are forced to pay fines for scooters that are parked in unauthorized areas. One example of a municipality fine comes is the University of Texas Parking and Transportation Services handing down a $150 fine to scooter companies per scooter that is improperly parked, plus an additional $25 fine per day of storage if the scooter is impounded. By having hyper accurate location operators we can monitor the fleet location and better analyze customers’ parking habits, which in turn can reduce that cost dramatically.
RECOVER STOLEN/LOST ASSET (repair cost)
As operators continue putting more scooters on the roads, it is going to take better location technology to keep track of the ever-increasing fleet. Stolen and destroyed scooters ravaged the industry during its introductory phase, and as micromobility expands to more cities, it would be prudent for operators to be more prepared. Increased location accuracy will help expedite the scooter recovery process, as each scooter lost incurs a cost of $300-$400 for the company. Additionally, it will work to serve as a preventative measure through increased control on rider behavior. This will create a better relationship between host cities and operators and prevent damage before it occurs.
Another common expense for micromobility operators is liability insurance, spending around $540 per scooter each year. Based on conversations held with insurance companies and experts, we predict that increased location accuracy will expedite the recovery of lost scooters and better control rider behavior. For example, if the scooter’s location was precise enough to consistently distinguish between riding in the bike lane versus the sidewalk, scooter companies could encourage riders to stay in appropriate areas and therefore reduce the risk of accidents. Being able to incentivize safety and penalize dangerous behavior is key for insurance reduction. The combination of increased data supply and more control over riders will allow insurance companies to feel more comfortable, therefore reducing costs and/or expanding coverage for the industry. Expect to see annual savings of $27 or more per scooter if such strategies are implemented.
Clearly, increasing location accuracy is a must to be a major player in today’s market. The question is who will be the first ones to take advantage of it?