Electric Scooter Rentals: Fad or Revolution?

This article was written by Tim Wooley.

Long have cars, bikes and public transport dominated humanities movements. However, with the success of ride sharing services, investors are again interested in partnering with firms who are disrupting how we have traditionally moved around. Of particular note are dockless electric scooter rental firms such as Bird and Lime. Following the success of dockless bike sharing in 2017 China, ex-Uber executives descended upon Los Angeles and overnight deposited hundreds of scooters across the city. The service quickly took hold as a market for micro mobility was unearthed. Since then the major two players and numerous competitors have expanded aggressively, fighting for market dominance in cities and communities throughout Northern America and Europe.

The business model is simple. Purchase electric scooters, distribute them throughout a city and monitor their usage and wear. Through integrated apps, users can unlock the scooters by scanning a QR code and ride anywhere with fares beginning at $1 USD and charging incrementally for minutes used. When the rider arrives at their destination, the scooters can be left in any public space that does not obstruct pedestrians or vehicles. On the supply end, these firms enlist contractors to collect the scooters, charge them and then redistribute them at locations for a fee, usually around $5 USD per scooter. These companies can also leverage their access to huge swathes of locational data to distribute scooters to areas that will likely see high levels of demand (think tourist attractions).

Is it working?

Underlying these businesses are interesting and unique markets. Take for example the secondary market of redistribution. As those who redistribute scooters are legally deemed contractors, there is no minimum wage and no regulation. In fact, there are often instances of redistribution contractors misleading, abusing or outright assaulting those who threaten their ‘patch’.

Another interesting component of the business model is that currently the unit costs don’t add up. Due to increased competition, market participants are expanding so aggressively that the current pricing structure equates to a net loss over the lifetime of the scooters. In part this can be attributed excessive amounts of money raised from investors who want to be a part of the next big transport revolution. Given the losses being made in this market, consolidation of services, and pricing hikes, are inevitable. As such, the benefits of cheap transportation may be threatened, our outright eroded.

Costs of Cars

This emerging market allows us to rethink how we relate to our spaces. As cars have dominated our means of movements over the last 100 years, cities have grown to accommodate. Whether this be significant infrastructure committed to roads, or parking. Reimagining how we get from A to B also allows us to reimagine how to plan our cities. From an economical perspective opening up opportunities for more efficient uses of land and resources.

Time poverty is also an increasing threat to modern economies, with our modes of transport playing no small part. The average Australian spends 66 minutes a day commuting; the average Sydney-sider spends 3 weeks a year in traffic. Time lost on an individual level aggregates across out country and this is something economists should be very interested in. Our modes of transport are currently costing the Australian economy millions of dollars a year in lost productivity, but perhaps from a more human perspective, our current modes of transport are robbing us of dinners with our families and drinks with our friends.

Finally, it is well known by now our transport option of course is a contributor to our degrading environment. As economists we should be looking for forms of transport that avoid the negative externality of carbon emissions. Whilst electric scooters are no more carbon neutral than the energy grid we charge them on they are a step in the right direction. Hopefully strengthening the incentives for policy makers to fundamentally change our sources of energy to a more sustainable model.

Servicing a forgotten market

Infrastructure has long had the power to both connect and segregate communities. Whilst government has worked tirelessly to better integrate under-serviced areas of the city, there are often imbalances in the mobility of citizens. In particular, market dynamics ensures that wealth can grant access to better infrastructure and transport services. This is not necessarily a bias, but instead a manifestation of excess demand for property in better integrated areas and excess supply in others. However, this dynamic often means that those without access to the capital needed to, say, buy a car also face few travelling options.

In an urban setting these scooters provide a cheap alternative, with uptake of scooter use to commute to work skyrocketing across the US and Europe. Promoting integration of people, culture and community is not just a social undertaking however. Freedom in the movement of people is also aids economic integration of citizens, gaining access to markets and opportunities otherwise not available.

But what about Australia?

Australia has a turbulent history with dockless transport services. Most recently, the failed introduction of O-Bikes in Melbourne raised concerns over the use of public space and the potential for misuse. However, much of the troubles surrounding the introduction of O-bikes in Melbourne, and indeed the electric scooter rental companies worldwide, is the way they were introduced. Uber’s ‘do now, ask for permission later’ attitude to regulation has perhaps inspired the wrong type of behaviour in these emerging companies. In cities where local government was consulted and able to work with, the adoption of Bird and Lime bikes has been almost universal. In cities where the local government has been excluded and regulation and laws laughed at, however, there have been issues with dumping and dangerous use.

This revolution in micro mobility may come off as tacky, reminding us of the razor scooters we have long discarded to the garage or regifted. But it is likely here to stay, as communities gain access to a cheap, carbon conscious, easy and, most importantly, fun mode of transport.